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Markets

Polish assets gain as CEE stocks, FX mostly ease

  • Czech bond yields dipped from new highs as markets priced in budget news before the finance ministry announces 2020 deficit figures on Tuesday.
  • The theme of lockdowns in Europe appeared again and it weighed on clothing retailers but today they are bouncing back.
05 Jan 2021

PRAGUE: Prague and Hungarian stock markets retreated from multi-month highs on Tuesday and currencies mostly drifted lower after renewed concern about the COVID-19 pandemic stalled a rally.

Czech bond yields dipped from new highs as markets priced in budget news before the finance ministry announces 2020 deficit figures on Tuesday. The pandemic has hammered the region's public finances.

In Poland, assets bucked the weakening trend with a 0.7% rise in the blue-chip index, led by a rebound for clothing retailer LPP. The zloty gained 0.2%against the euro, bid at 4.54 at 1038 GMT.

"Yesterday LPP and (shoe retailer) CCC were bottom of the WIG 20," said DM BOS analyst Konrad Ryczko. "The theme of lockdowns in Europe appeared again and it weighed on clothing retailers but today they are bouncing back."

Market participants are keen to move on from a volatile 2020, but new lockdowns, notably in Britain and Germany, brought to a halt a rally fuelled by some promising economic indicators.

The number of active COVID-19 cases in the Czech Republic was at its highest since late October. The country's strictest lockdown measures apply, although industry remains open.

The crown dipped to 26.196 per euro. Hungary's forint was a touch down at 361.20. Stock indices in Prague and Budapest touched their highest marks since February and March, respectively, on Monday but shed 0.8% and 0.2% on Tuesday.

"It is about COVID again," a Prague forex dealer said.

The dealer said the crown's firmer trend faltered at around 26.100 per euro in the previous session and that level, which ended rallies last month, would continue to provide resistance.

On bond markets, yields mostly dropped, with the Czech 10-year benchmark at around 1.28% and just off its highest level since May.

Czech Finance Minister Alena Schillerova said on Dec. 30 the 2020 budget deficit would reach a record 370 billion to 380 billion crowns ($17.83 billion). Markets are bracing for another year of high borrowing with public finances likely to end 2021 deep in the red.