BUDAPEST: Hungarian and Polish stocks hit their lowest levels for several months on Friday, knocked by fears of a global trade war, even though Central Europe's biggest independent lender OTP published an upbeat earnings report.
US President Donald Trump announced big tariffs on steel and aluminum imports, triggering fear of a global trade war and a continued decline in equities prices across global markets.
Stocks and currencies in Central Europe's emerging markets have already taken a beating in past weeks due to rising global inflation fears and signs that the Federal Reserve may increase its interest rates faster than expected.
"Mr Trump has put the cherry on the cake," said Equilor analyst Zoltan Varga.
"In such global headwind, even good ships like OTP cannot advance," he added.
OTP reported record profits for 2017, projected new acquisitions and reaffirmed a plan to increase dividend payments on Friday.
After an initial almost one percent rise, its shares fell 0.6 percent by 0944 GMT.
Budapest's main stock index fell 0.8 percent, touching a four-month low, while Warsaw's bluechip index set an eight-month low, shedding one percent.
The Hungarian index has been retreating from record highs and Warsaw has declined from its highest levels since 2011 amid the past months' global sell-off. Their loss on Friday was smaller than a two percent decline in Fraknfurt's main index .
Before the recent retreat the region's equities and currencies had received support from well-performing bank stocks and robust economic growth.
The Czech Republic published detailed fourth-quarter economic output data on Friday, which showed hefty 5.2 percent annual growth.
The figures do not indicate rising inflation pressure and are unlikely to bring forward further Czech central bank interest rate hikes expected for later this year, Erste analyst Jiri Polansky said in a note.
The crown still firmed by 0.2 percent to 25.39 against the euro, while the forint and the leu shed 0.1 percent.
The zloty, which has weakened more this week than its main regional peers, after outperforming them earlier, fell by a third of a percent to 4.197, approaching the 4.2 psychological line and the multi-month lows beyond 4.2035.
Despite global inflation concerns, the Polish central bank is expected to keep its interest rates at record lows all this year.
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