TOPWRAP 1-Hungary, Eastern Europe debt fears gnaw at euro

* Hungary debt remarks spark crisis fears, forint falls

* Euro hits four-year low against the dollar

* U.S. jobs data disappoints

By Robert MacMillan

NEW YORK, June 4 (BestGrowthStock) – The possibility of a Hungarian
debt crisis pushed the euro to a four-year low against the
dollar on Friday and reignited fears more Eastern European
nations could reveal financial frailties.

The new Hungarian government spooked investors and knocked
more than 2 percent off its currency, the forint, versus the
euro, after a prime minister’s spokesman said he supported the
view the country had only a slim chance of avoiding the kind of
debt crisis that plunged Greece into financial instability.

“In Hungary the previous government falsified data. In
Greece, they also falsified data. In Greece the moment of truth
has arrived. Hungary is still before that,” said Prime Minister
Viktor Orban’s spokesman Peter Szijjarto at a news conference.

The central bank rushed to reassure investors Hungary’s
budget was sustainable. It said it had an account surplus and
that external financing capacity should remain positive in the
next two years. [ID:nLDE65306M]

The bank also said Hungary’s deficit could be 4.5 percent
of GDP, while analysts see a deficit of 5 percent (HUDEF1: ).
Both are above the target of 3.8 percent.
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Graphic: Europe’s credit crisis weighs on euro

http://link.reuters.com/maq38k
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Worries about Hungary have reignited market concern over
the fiscal health of Eastern European nations, though many
analysts believe the region’s sound economic fundamentals would
prevent a Greek-style debt crisis.

“The market fears another Greece situation … Fear is
taking its toll,” said Marc Chandler, analyst at Brown Brothers
Harriman.

Eastern European stocks are down 8.5 percent this year,
underperforming broader emerging equities, which have fallen
7.7 percent in the same period.

“If you’re a fund manager sitting in Greenwich,
Connecticut, and you see Europe going down the pan, you get rid
of everything,” said Capital Economics economist Neal Shearing.
[ID:nLDE6531HK]

The euro fell (Read more about the trembling euro. ) as low as $1.1972, according to EBS trading
platform. Selling pressure started after a disappointing U.S.
jobs report. The single currency hit its lowest against the
dollar in more than four years after comments by French Prime
Minister Francois Fillon on exchange rates. [ID:nN04134113]

He said he was not concerned by the current level of the
euro to the dollar and saw only good news in the parity between
the currencies [ID:nLDE6531E6].

Later, the remarks were clarified, saying his reference to
parity was about the general evolution of the exchange rate
between the euro and the dollar. [ID:nWEA4967]

Hungary’s news and the U.S. jobs report hurt major U.S.
stock indexes. The Dow Jones Industrial Average (.DJI: ), S&P 500
Index (.SPX: ) and Nasdaq Composite Index (.IXIC: ), ended the day
down more than 3 percent. The S&P 500 closed below the May 6
“flash crash” intraday low of 1,065.79, and at its lowest level
since February 8.

For the week, the Dow fell 2 percent, while the S&P fell
2.3 percent and the Nasdaq 1.7 percent.

JOBS DATA BLUES

U.S. government data released Friday showed the economy
added fewer jobs in May than expected, with many of them
temporary hirings for the U.S. Census, which the government
conducts once a decade. [ID:nN03243431]

Nonfarm payrolls rose by about 431,000 jobs on the surge in
government hiring, but private employment, which measures the
labor market’s strength, rose 41,000, a number that analysts
said was disappointing.

Still, they said it was unlikely that the economy would
slip into recession. Companies are spread too thin on labor and
cannot increase working hours indefinitely to maintain output,
they said.

“We do not yet have the makings of a double-dip, and we
still believe that private sector job creation will gradually
improve over the rest of the year,” said Nigel Gault, chief
U.S. economist at IHS Global Insight in Lexington,
Massachusetts.

It was the fifth monthly increase in employment. The report
also showed that the unemployment rate dropped to 9.7 percent
from 9.9 percent in April, although the decrease reflected
workers leaving the job market.

Stocks

(Reporting by Krisztina Than in Budapest; Sujata Rao and
Sebastian Tong in London; Leah Schnurr, Nick Olivari and
Vivianne Rodrigues in New York and Crispian Balmer and Sophie
Louet in Paris. Writing by Robert MacMillan; Editing by Andrew
Hay).

TOPWRAP 1-Hungary, Eastern Europe debt fears gnaw at euro