News
CEE: Mixed – Turkey, Poland Dec PMI declines slightly whilst Hungary, Czech Republic managed to show some gains (p1)
HU: Negative – Long end bond yields move above 10% amid ongoing uncertainty about IMF talks and biggest opposition protest since the 2010 elections (p1)
Today’s Events
HU: HUF45bn 3M t-bill auction/ TK: December CPI / Dec PPI / LV: November industrial output / CZ: December budget balance
EEMEA Markets
* December PMIs showed signs of stabilization versus November: whilst the bigger and more closed economies, Poland and Turkey saw further moderate decline in their PMI numbers Czech Republic and Hungary indicators edged slightly upwards. The simple average of the 4 countries remained broadly unchanged versus November. The released numbers are still in line with a slowdown in H1 but continue to be in line with our view that the slowdown will rather be s soft patch than a freefall we observed in 2008/2009.
* Hungary: following the approval of the disputed Central Bank law last Friday and the biggest opposition protests since the 2010 election (against the introduction of the new constitution which came into affect this year) long end HGB yields moved above 10% yesterday (for the first time since 2009) whilst EUR/HUF was hovering around the 315.00 level. Today investor confidence will be tested again as the AKK will auction HUF45bn 3month t-bill. Separately local press reports suggested that leader of the Hungarian delegation, Fellegi, will travel to Washington next Wednesday for the continuation of the informal talks with the IMF. At this stage even the start of the formal talks look uncertain. Reports in local media this morning (index.hu) suggest that the government intends to use about USD775mn FX reserves to repay municipal debt it took over last year. The n-t outlook for Hungarian assets clearly looks negative with some divergence between HGBs and EUR/HUF.
* Turkey: the CBT started the year with ongoing fight against TRY depreciation as it intervened directly in the FX market yesterday. Reuters reported the volume around USD300mn. The move managed to stabilize the TRY basket around 2.16 level which is about 2% below the pain threshold of 2.20. Last week the CBT confirmed the dual interest rate policy whilst pushed short end TURKGB yields above 11% whilst the mid-long end parts remained broadly stable. The December CPI numbers published this morning surprised slightly on the upside with the YoY figure coming in at 10.45%YoY versus 10.13%YoY consensus. The details are clearly not that hawkish as the H and I core CPIs remained broadly unchanged. The H core CPI came in at 8.54%YoY vs. 8.48%YoY whilst the I number even managed to slow to 8.12%YoY from 8.18%YoY.
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Gyula Toth
UniCredit Research