Currencies, stocks ease, shrugging off third-quarter GDP rebound

BUCHAREST: Central European currencies and stocks failed to bounce on Friday despite strong third-quarter economic data, with assets mostly easing as a rally on vaccine hopes faded and worries over the latest surge in COVID-19 cases returned.

The region's economies rebounded mostly better than expected last quarter. On a quarterly basis, economic output rose by 5.6% in Romania, 7.7% in Poland and 11.3% in Hungary as consumption and industry picked up the pace, softening annual declines.

The data "confirmed a strong recovery in the third quarter in CEE," Erste Bank said in a daily note.

But with a surge in new coronavirus cases across Europe, the outlook for the fourth quarter was muddied by new restrictions, ranging from nighttime curfews to shutting shops and implementing limited lockdowns.

By 1110 GMT, the Hungarian forint was down 0.4% against the euro, while the Polish zloty and the Romanian leu were each 0.1% weaker.

Hungary surprised on the upside, with the economy contracting by 4.6% year-on-year in the third quarter, milder than what analysts forecast. Analysts said the hit from the second wave in the fourth quarter would likely be less than earlier this year.

"Renewed containment measures will to a bigger extent dampen domestic demand, considering the worsening prospects of the labor market," Erste said.

Piotr Bielski, director of the economic analysis department of Santander Bank Polska, said Poland was likely facing a quarter-on-quarter decline to end 2020.

In Romania, several analysts said third-quarter figures did not change their full-year estimates, as Romania, which holds a parliamentary election on Dec. 6, adopted less restrictive measures in the fourth quarter.

"We believe that although there is plenty of room to cut the key rate, the central bank will try to keep its firepower intact," ING Romania said in a note, after the central bank held steady on interest rates on Thursday.

"More meaningful easing of the policy is only likely if the economic situation deteriorates significantly."

Elsewhere in the region, the Czech crown was 0.1% higher versus the euro. The country published data for the third-quarter at the end of October, posting a stronger than expected rebound.

Warsaw's blue-chip index led stock losses, falling 0.8%. Bucharest was down 0.6%, while Hungary's fell 0.3%.