Prague stocks set to suffer biggest loss since 2020 as Ukraine tensions hit


BUDAPEST/PRAGUE, Feb 21 (Reuters) – Shares in Prague were set to suffer their biggest one-day loss since the end of 2020, with other central European stock markets also falling along with global markets amid tensions persistent around Ukraine, although most currencies held on to gains with rate hike expectations providing support.

Shares in Prague (.PX) lost 2.17% at 1453 GMT while Warsaw (.WIG20) lost 2.94%. Budapest (.BUX) was down 2.62%, while Bucharest (.BETI) was down 1.24%.

Central European stock markets had been under pressure since early Monday, with lower liquidity in Prague leading to losses, traders said, even amid optimism about Ukraine.

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Russian troops have massed around the borders of Ukraine, raising fears in the West of an invasion that Moscow has denied.

News that US President Joe Biden and Russian President Vladimir Putin had agreed in principle to hold a summit on the crisis had boosted morale earlier on Monday, but that quickly faded, sending stocks tumbling and accelerating losses in Central Europe. Read more

Currencies have fared better but have been volatile due to tensions in Eastern Europe in recent weeks, although they remain close to 2022 highs.

As markets eyed another interest rate hike in Hungary on Tuesday, the forint posted early gains and led the region on Monday, rising 0.35% to 356.54 per euro. It has gained 3.6% since the start of the year.

“Tomorrow’s rate hike is taken for granted by investors, so it won’t really move the forint,” said an FX trader in Budapest.

“If the central bank increased the base rate by more than 50 basis points, that would be positive for the currency, but I don’t see a big chance for that.”

In Poland, the zloty fell slightly by 0.04% to 4.5329 per euro.

Strong retail trade data on Monday, combined with strong industrial production numbers last week, supported bets for further rate hikes.

“Overall, this all adds up for us to an environment in which the Monetary Policy Council (MPC) will continue to tighten monetary policy. We expect the main interest rate to be raised by 50 basis points in March,” said Adam Antoniak, senior economist. at ING Bank Slaski, said

Among other exchanges, the Czech koruna eased 0.21%, while the Romanian leu remained stable.

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Additional reporting by Jason Hovet in Prague and Alicja Ptak and Alan Charlish in Warsaw; Editing by Devika Syamnath and Alex Richardson

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