BUDAPEST: Central European stocks and the forint eased slightly on Friday as an escalating US-China trade war cut risk appetite and investors looked ahead to Sunday's parliamentary elections in Hungary.
Prime Minister Viktor Orban is expected to win a third term in one of the bloc's most closely-watched elections.
Orban is a leader of Central Europe's resistance to the EU's migrant quotas and French-German ambitions to deepen the bloc's integration. Pollsters, however, see a slim chance that the fragmented opposition could drive Orban out of power.
That would make Hungary's economic and monetary policy outlook uncertain, and provide an unpriced big upset to markets.
Hungarian government bond yields, which have been kept low by unorthodox measures from the central bank led by an Orban ally, were flat in thin trade as investors did not touch their bets on no government change.
"There is no change in the news, we can't do anything but wait," one Budapest-based fixed income trader said.
The forint eased 0.14 percent against the euro by 0907 GMT, while other regional units were firmer or steady. Trading at 311.90 it still stayed near its strongest levels since the middle of March.
The region's main equities markets gave up some of Thursday's gains, tracking Asian and Western European markets, led by Budapest and Warsaw, with 0.5 percent loss over Thursday.
Hungarian and Czech industrial output growth slowed in February according to data released on Friday, reflecting a fall in Germany, the region's key trade partner.
But growth in manufacturing and in economic output is expected to remain strong in both countries this year.
A minor weakening of the Czech crown and Prague-listed shares signalled that the country's markets continue to shrug off political jitters.
Government coalition talks between the ANO party of Prime Minister Andrej Babis and the Czech Social Democratic party broke down late on Thursday.
The Czech central bank (CNB) said in the minutes of its March 29 meeting that risks to its forecasts were slightly anti-inflationary.
The bank is still expected to continue to deliver one more interest rate hike this year, in August or September, to fight inflation, Erste analysts Jiri Polansky and Jan Zemlicka said.
The Czech crown is seen strengthening more than 2 percent against the euro over the next year, outperforming regional peers, a Reuters poll of analysts showed on Friday.
Some markets in the region, including Romania, are closed on Friday and Monday due to the Orthodox Easter.
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