CEE MARKETS-Tariffs push central European stocks to biggest weekly fall in years, FX slip

By Anita Komuves and Jason Hovet

BUDAPEST, April 4 (Reuters) - Stock markets in Warsaw, Prague and Budapest fell at their sharpest weekly rate in at least three years on Friday as central Europe got swept in a global rout following U.S. President Donald Trump's sweeping tariffs.

China retaliated against U.S. tariffs on Friday, accelerating market falls.

Weekly losses in central Europe's stock indices reached over 8% by midday, the biggest drop for Prague and Warsaw since the onset of the COVID pandemic in early 2020.

Warsaw's 8.1% weekly fall by 1118 GMT was just past an 8.0% fall seen after Russia's invasion of Ukraine in 2022. Budapest shares were also down the most in a week since 2022.

The penalties announced by Trump on Wednesday triggered a plunge in world markets and drew condemnation from other leaders reckoning with the end of a decades-long era of trade liberalization.

The prospects of accelerating trade wars prompted central Europe's currencies to also slip to multi-week lows, cementing a reversal after the region had hit significant highs since the start of the year.

Shares tracked European peers lower as investors grappled with prospects of a global recession.

Prague .PX led losses on Friday with a 3.6% drop, while and Warsaw .WIG20 lost 2.0% and Budapest .BUD equities almost 3%.

"(The China retaliation) was another impulse," a Prague-based equity trader said. "Nobody wants to hold big positions before the weekend."

The European Union was hit with a 20% U.S. import tariff rate. Central European economies rely heavily on exports, and while companies' direct route to U.S. markets is limited, the region faces weaker growth prospect due to heavy trade with EU partners like Germany.

Banking stocks were among the biggest fallers in the market slide this week, while Czech gunmaker Colt CZ Group CZG.PR said on Thursday it would be hit by the U.S. tariffs, sending its shares down around 6% on Friday.

Economists and policymakers have estimated varying impacts on economic output in the region.

Polish Prime Donald Tusk has said tariffs may reduce the pace of growth of the economy by 0.4%. Bank CSOB has estimated up to a 1.5% hit to the Czech economy in this year and 2026 combined.

FX FALL

Policymakers have been bracing for trade wars, and central banks have been cautious on easing monetary policy, with most holding rates steady since last year and assessing the outlook.

Data on Friday showed Czech consumer prices ticked up 0.1% in March, keeping year-on-year inflation above forecasts at 2.7%, raising chances the central bank - which paused an easing campaign last month - will not move quickly on rate cuts.

The Czech crown EURCZK= lost 0.5% and was trading at a two-month low at 25.15 to the euro.

The Polish zloty EURPLN= weakened 0.4% to trade at 4.245 per euro, its weakest level since January and continuing a retreat from 10-year highs hit in late February.

On Thursday, Polish central bank Governor Adam Glapinski abandoned his previously hawkish views and did not rule out cutting interest rates as early as May.

"Trump's tariffs ... really shook up the global market ... And Adam Glapinski added to this, specifically when it comes to the złoty," an FX trader in Warsaw said.

The Hungarian forint EURHUF= was 0.6% weaker, trading at 405.05 to the euro, its weakest since end-February.

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