Currencies ease as optimism over stimulus measures loses steam
Central European stock indexes fell and currencies eased on Monday, as massive economic support packages aiming to shore up economies battered by the coronavirus pandemic failed to reassure markets.
The negative mood could last until the number of cases starts dropping globally, a trader in Budapest said.
"More liquidity could be a solution in the short term but in the long term it will not be able to fix the problem that people simply cannot go to work." There were more than 720,000 confirmed cases of coronavirus worldwide by Monday, and governments around the world kept announcing stricter lockdown measures to combat the spread of the virus, further halting economic activity.
"The CEE region looks so far more vulnerable than many other EM economies amid the corona recession," Nordea said in a note.
The reason for this, the note adds, is that economies of these countries are based on exports to the European
Union, which has become the epicentre of the spread of the virus. Budapest's equities led losses by dropping 2.8% by 0758 GMT.
Warsaw's stock market was down 1.8% and Bucharest lost 1.5%. Czech stocks slipped with the rest of the region and were down 2.1%. Prague-listed banking shares were under pressure after the finance ministry said it was preparing a bill that could mean a six-month blanket moratorium on mortgage, consumer and business loan payments.
J&T Banka analysts said it was still difficult to assess the exact impact and that benefits from the measures could also come. Regional central banks and governments have taken several emergency steps recently to help their economies.
The Polish and the Romanian central banks have delivered emergency rate cuts, and the Czech central bank cut rates on Thursday for the second time in two weeks. In Poland, another interest rate cut might be considered to support the economy during the coronavirus outbreak, Polish rate-setter Eryk Lon said on Monday.
The central bank in Hungary left its benchmark lending rate at 0.9% last week and introduced a fixed-rate collateralized loan instrument with unlimited liquidity, in addition to other liquiditysupporting measures.
Regional currencies eased, with the Hungarian forint leading losses by dropping 0.69% and trading at 358.03 to the euro. The Czech crown was down 0.46% at 27.425 to the euro while the Polish zloty slipped 0.16% to 4.537 to the euro.