BUX up on improving mood

While most European markets spent most of the day in the red, turning north in the final hour only, the Budapest parquet ended a three-day series of losses from early in the day.

Contributing to the improved mood were January Hungarian manufacturing PMI data showing stronger growth after lacklustre figures in December, the visit to Budapest of the German chancellor, signs that Hungary-US relations are returning to business as usual, an eulogy from the IMF on Hungary's economy accompanied with criticism more subtle than in the past, and a hint at possible easing by the head of the National Bank of Hungary (MNB).

A few good advices from Merkel on the role of opposition and media in a democracy notwithstanding, the government heads of Hungary and Germany amiably agreed to disagree on Hungary's "illiberal" approach the democracy, a difference with no apparent harm to relations. At a joint press conference on Monday in Budapest Angela Merkel emphasised EU unity in solving the Ukraine crisis, but common interests also include what she called "supporting the vision of a free trade zone between the EU and the Eurasia Union", a strategy which, as Hungarian prime minister Viktor Orban commented, "would solve many of our problems".

According to analysts, the prime minister was referring to Western, including US, head-shaking over his policies towards Russia.

After a US ban of entry last fall concerning some Hungarian government officials on suspicion of corruption, an issue still unsettled between the two countries, news on Monday that Hungary and the US will sign an agreement on social security on Tuesday suggested relations are getting back to normal.

The IMF said after a mission to Budapest last week that Hungary's "macroeconomic policies have contributed to a welcome reduction in vulnerabilities, strong growth, and a reduction in unemployment," although "the country remains susceptible to shocks and its medium-term growth prospects are subdued." "This juncture presents a window of opportunity for policymakers to re-calibrate policies to address the remaining vulnerabilities and structural weaknesses. To this end, there is a need for gradual fiscal consolidation based on more efficient, equitable, and growth-oriented public expenditure and tax policies," the IMF said, repeating its disagreement with sectoral taxes and advising "more progressivity" in the tax regime.

Finally, despite the strong PMI reading, the governor of the MNB told journalists on Monday that the bank's indication in January that it may mull easing could happen if the inflation outlook in its March Inflation Report warrants it. He said liquidity provision could be expanded through the MNB's Funding for Growth Scheme, a prospect he has already broached earlier. But if warranted, the options include a rate cut, too, a member of the rate-setting Monetary Council of MNB added.

MOL announced on Monday the completion of purchase of ENI Romania, including 42 fuel stations.

OTP won 0.14% to HUF 3,655 on turnover of HUF 2.37 bln from a HUF 4.22 bln session total, nearly two-thirds of the daily average this year.

MOL rose 3.03% to HUF 11,390 on turnover of HUF 1.08 bln

Magyar Telekom increased 1.40% to HUF 362 on turnover of HUF 198 mln.

Richter advanced 0.27% to HUF 3,750 on turnover of HUF 473 mln.

The bourse's mid-cap BUMIX went out 0.29% higher at 1,426.89.

Elsewhere in the region, the WIG 20 in Warsaw was down 0.91%, while Prague's PX gained 0.24%. Western Europe's major indices were all up ahead of their close Monday, FTSE-100 in London 0.24%, DAX30 in Frankfurt 0.80%, and CAC40 in Paris 0.25%.