Updates throughout with GDP outlook, Tusk comment, Czech rates, central banks

By Anita Komuves

BUDAPEST, April 7 (Reuters) - Central European stock markets continued their worst slide in at least three years on Monday, a third day of sharp falls as President Donald Trump's steeper-than-expected U.S. tariffs stoked fears of accelerating trade wars and a global downturn.

While the region's main bourses had cut earlier losses by mid-afternoon trade, they stayed well down, and currencies were also mostly weaker and bond yields fell.

Hungary's blue-chip index .BUX was down 1.2% at 1252 GMT, after having fallen 12% earlier in the session to hit its lowest since November 2024.

Warsaw's blue-chip equities gauge .WIG20 dropped 1.4%, and was at its weakest since February. Prague .PX lost 3.9% and hit its lowest since mid-January.

The bourse in Prague has lost more than 10% since Thursday's open, its worst three-day stretch since the start of the global COVID-19 pandemic in early 2020. Warsaw and Budapest have dropped around 12% and 8%, respectively - their biggest three-day fall since just after Russia's invasion of Ukraine in 2022.

The tariffs add risks to central Europe's economies that have been recovering since an inflation surge of recent years. While the region does little direct trade with the U.S., it relies on exports to major U.S. trading partners in Europe like Germany, so will feel a strong indirect impact from the tariffs.

Czech Finance Minister Zbynek Stanjura said last week a trade war may cut economic growth by 0.6-0.7 percentage points this year. Polish Prime Minister Donald Tusk has said that new U.S. tariffs may reduce growth by 0.4%.

"The Polish stock market also got a ricochet, but political and economic stability are our assets in this difficult time. We will persevere calmly!," Tusk wrote on X on Monday.

RATES OUTLOOK

Currencies cooled losses on Monday, but remained down. The Hungarian forint EURHUF= was 0.3% lower at 407.9 versus the euro, its weakest since early February.

The Polish zloty EURPLN= hit its weakest level since last November and was down 0.7% on the day against the euro at 4.2935 by the afternoon. It has turned negative year-to-date, retreating from a 10-year high hit in late February.

"This is all just a risk off and the market is really waiting to see what Trump will do," an FX trader in Warsaw said.

The Czech crown EURCZK= regained some ground after falling to a 2-1/2 month low of 25.300 per euro in after-hours trade on Friday, capping its biggest weekly loss in three years.

The Czech rates market has fallen since the middle of last week, with a closely-watched forward rate agreement down 40 basis points, signalling some expectations of deeper rate cuts ahead.

The potential effect of tariffs adds another risk for central bankers in the region.

At its March 26 policy meeting, the Czech central bank paused its easing cycle and said trade wars could cause one-off price rises in the short-term.

Last week, though, Polish Central Bank Governor Adam Glapinski abandoned his previously hawkish views and did not rule out cutting interest rates as early as May.

On Monday, Romania's central bank held its benchmark interest rate at 6.50% as expected, faced with heightened uncertainties over trade tariffs and fiscal uncertainty ahead of a repeat presidential election.

(Reporting by Anita Komuves in Budapest, Jason Hovet in Prague and Karol Badohal in Warsaw; Editing by Andrew Cawthorne and Emelia Sithole-Matarise)

((komuves.anita@thomsonreuters.com)(+36 70 795 8815))

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