Central European stocks advance on US inflation

Analysis

Central European stocks rose on speculation that the US Federal Reserve won't need to keep raising interest rates in the world's biggest economy, after a government report showed inflation slowed in July. PKO Bank Polski SA and Raiffeisen International Bank AG paced gains in banking stocks, among the most sensitive to rate changes. Oesterreichische Post AG advanced after Goldman, Sachs & Co. recommended shares of Austria's postal service. The NTX Index of 30 companies in central and eastern Europe added 1.3% to 1546.34 in Vienna, climbing for a third day. Poland's WIG20 Index gained 1.4% and Austria's ATX Index rose 1.5%. Both markets were closed on Tuesday for a public holiday, when stocks rallied across Europe. Hungary's BUX Index increased 0.3%, while the Czech PX climbed 1.1%. The inflation data „is a great help to emerging stock markets,” said Viktor Baroti, who helps manage $1.5 billion in Hungarian assets at Erste Bank AG in Budapest. Rising interest rates worldwide, and speculation of more to come, drove emerging-market indexes lower in May and June as investors were attracted to less risky assets with prospects of safer and higher returns. The consumer price index excluding food and energy, the so- called core measure, rose 0.2% in July, the Labor Department said. That was the smallest increase since February and follows a 0.3% gain in June. The report is further evidence that inflation may be decelerating in the world's biggest economy. The Labor Department said on Tuesday producer prices, a measure of inflation at the wholesale level, increased less than economists expected in July.
Federal Reserve policy makers meet on Sept. 20 to decide whether to resume increasing interest rates to control inflation after leaving them unchanged this month. PKO, Poland's largest bank, gained 2.4% to 38.5 zloty. Raiffeisen, the biggest non-Russian lender in the former Soviet Union, climbed 4.5% to € 71.26. Oesterreichische Post advanced 5.4% to a record € 24.77. Shares of the state-controlled postal service were raised to „outperform” from „in-line” by Matthew Lloyd, an analyst at Goldman Sachs, citing better-than-expected operational performance in the H1. Profit from operations rose 21% to € 65.6 million ($83.2 million) in the period, the company said on Aug. 11. AB Mazeikiu Nafta, Lithuania's refinery, dropped 7.4% to 7.60 litai. OAO Transneft, Russia's monopoly oil-pipeline operator, may close the main pipeline to Lithuania because it is too old, the Moscow Times said, citing CEO Semyon Vainshtok. Giedrius Karsokas, spokesman for Mazeikiu Nafta, declined to comment on the report. (Bloomberg)

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