BUDAPEST/WARSAW: Warsaw bank shares led Central European equities lower on Monday as they tracked losses in Western Europe and Asia following Friday's technology sell-off on Wall Street.
Investors were also cautious before Wednesday's Federal Reserve meeting which is expected to raise interest rates and possibly give signals about the pace of future hikes that could influence appetite for emerging markets assets.
Poland's zloty eased a quarter of a percent to 4.1932 against the euro by 0857 GMT, while other Central European currencies were steady.
"Some investors may be also closing their positions ahead of the expected Fed hike and lower zloty liquidity due to Thursday (Corpus Christi) national holiday," one Warsaw-based dealer said.
Some investors expect the breakdown of Polish May inflation data, due at 1200 GMT, to show lower inflation pressure than earlier expected.
That would underpin forecasts from Polish central bank governor Adam Glapinski that the bank is unlikely to start to lift its record low interest rates until the end of next year.
Another rate setter, Lukasz Hardt, warned last month that a tightening of the labour market could lift wage-side inflation pressure as the European Union allows visa-free travel to Ukrainians.
From this week, Ukrainians can travel to EU member states without visas, raising the risk that some of the hundreds of thousand of Ukrainians who work in Poland may move further to the West, causing a labour shortage in Poland.
"As the risks of the inflation rate overshooting the (2 percent) target in the medium term are relatively low, the MPC (central bank) is likely to sustain its relatively dovish rhetoric, especially as demand pressure has been limited despite labor market tightening," Erste analysts said in a note.
"At this point, we see a possibility of a rate hike only in (the second half of 2018)," they added.
Warsaw's bluechip stock index fell 1.2 percent, with the sub-index of bank shares shedding 2 percent, while Western European bank shares also eased, with the STOXX Europe 600 banks index dropping 1.2 percent.
Polish banks PKO BP and Pekao shed 1.9-2 percent. Other bank stocks in the region eased less, with Hungary's OTP dropping 0.7 percent, while Budapest's main index fell half a percent.
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