During the final trading sessions of February, the region's main indices all posted positive gains. The largest increases occurred in Poland and the Czech Republic, which had been the worst performing markets since the beginning of the year. These gains were not driven by any particular news event, but rather by an improvement in global economic sentiment.
However, the situation could worsen for both regions in the coming days. In Poland, following the monthly meeting of the Monetary Policy Committee, no further interest rate cuts are expected. Nevertheless, the government is once again increasing pressure on the Committee members to implement a reduction. In recent days, there has even been a threat to propose legislation that would modify the powers of the Central Bank if interest rates are not lowered. Thus—although any drastic change in the Central Bank's stance is highly unlikely—the story of last year is repeating itself: it is unclear whether interest rates are being cut because it is truly necessary or due to political pressure (or, in other words, a lack of independence on the part of the Central Bank). As rates are lowered (and in such an aggressive manner), the latter explanation is gaining increasing traction.
Regarding the Czech Republic, attention will focus not on the macroeconomic side but on the micro side, on the business results that will be published throughout the month, among which Cesky Telecom and Komercni stand out.
In other countries, we would like to highlight that Russia is once again facing difficulties with OPEC due to the slowdown in oil prices. Until the government and the top executives of the major oil companies reach an agreement on whether or not to extend the promised crude oil export cuts through the second quarter of this year, the uncertainty will persist until Ali Rodriguez's visit to Russia on March 3rd. Therefore, we should expect this added instability in Russian stocks, particularly oil companies, in the coming days. On the macroeconomic front, S&P has once again acknowledged Russia's progress and recently upgraded the country's rating from stable to positive, which particularly benefited fixed income. The credit rating agency considers Russia's efforts to reduce debt payments for 2.003 by $2.500 billion (from $19.500 billion to $17.000 billion) to be very positive, since Russia has to face a larger volume of payments that year: $19.500 billion compared to $14.000 billion last year.
Poland's current account balance data for January will be released in March (the other countries in the region had already published theirs at the end of February). Despite slower export growth in Hungary, the Czech Republic, and Poland due to the European stagnation, the positive IFO data has increased the likelihood that some countries will once again see double-digit export growth figures. If we assume that exports lag behind the IFO indicator by about three months, then we can say that Poland has already seen the worst of the crisis.
One of the reasons why trade with other countries has not deteriorated as much is because countries like Hungary have been able to turn towards new expanding markets such as Russia, former Soviet Republics and even among themselves under the CEFTA (Central European Free Trade) trade agreement.
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