The PX-50 index gained 1.26% as the market approached the last trading day in May. CEZ, Komercni and Zentiva all posted gains exceeding 2% on the day. CEZ responded to a revision of its ratings outlook by S&P to positive as well as to market expectations for the Q1 IFRS cons numbers. These numbers came after the market closed but were below our expectations (ref to comment). Zentiva continued in its rebound on no stock-specific news. Emerging markets surprised many by not trading in negative territory despite the French “no” vote on Sunday - perhaps because the negative outcome was well flagged. However, it is worth mentioning the ongoing weakness of all major CE3 currencies versus the dollar, which may signal a further downturn.
Today, the Netherlands is holding a referendum on the new EU constitution. According to polls, the “no” camp is leading with 60%. Should the “no” camp win, it would be a second blow (after France’s on Sunday) to the EU. Markets have already been pricing in a negative outcome for the upcoming referendum. Nevertheless, should the “no” be confirmed, we would expect increased volatility in currencies, government bonds and increased equity risk premiums.