OREANDA-NEWS. February 17, 2015. European stocks and currencies edged up on Monday on hopes a ceasefire agreed between neighbouring Ukraine's government and Russian-backed rebels would take hold, although one east Ukraine town was still being heavily shelled.

Government bonds also eased slightly or were treading water, reflecting caution in European markets over the chances of a deal in talks later in the day between debt-laden Greece and its euro zone peers.

"Investors are still observing Ukraine and Greece," said Henryk Sulek, senior fixed income dealer at Raiffeisen Polbank in Warsaw.

Turnover was thin, though, as US markets will be closed on Monday. Government bonds could get support due to lingering expectations of central bank interest rates cuts in Hungary, Poland and Romania, traders and analysts said.

Romania offers 700 million lei worth of three-year bonds at a tender on Monday.

"We expect good demand for the bond and a yield below the 2.07 percent level at the previous reopening one month ago, despite the recent upward pressure on secondary market yields," UniCredit Tiriac Bank said in a note.

The leu and the zloty firmed 0.1 percent against the euro as of 0905 GMT. Hungary's forint retreated, shedding 0.1 percent, but still leads currency gains in the region since the end of last year.

Most stock markets in the region firmed up. Hungary's main index, however, weakened by 0.75 percent, led by OTP Bank and pharmaceuticals Richter, companies which have business in Ukraine and Russia.

A government-held town in east Ukraine sandwiched between two rebel-controlled areas was shelled on Monday, a day after the start of a ceasefire that Russian-backed separatists say does not apply there.

OTP stocks shed almost 1.5 percent, after hitting a 5-month high last week. Richter eased 0.6 percent, drifting further off three-month highs reached late last month.

"Ukraine's downgrade by Fitch (late on Friday) maintains concerns," said Akos Kuti, analyst of Equilor brokerage. "Also (oil group) MOL stocks ease because of the (weak) earnings report of (its Croatian unit) INA."