Summary

In the last week of July the Federal Reserve and the Bank of Japan were in the spotlight. In line with market expectations, the FOMC did not change the interest rates. The Fed reiterated that the latest data confirmed the good state of the US economy. However, the members of the council did not mention the potential date of the interest rates raise. Furthermore, the Fed pointed out that the most crucial factor was the inflation rate which was projected to remain low. As a result, the FOMC meeting was interpreted as dovish by market. Nonetheless, the Bank of Japan managed to arouse a little more emotions. The BoJ unexpectedly did not lower the interest rates, whereas it decided to increase the scope of its lending program. Investors learnt the latest economic data as well. The readings of the confidence indices for the Eurozone surprised positively. What is more, the release of the German Ifo index did not fail. It stood at 108.3 pts. vs 107.5 pts. expected. The unemployment rate for the Euroland amounted to 10.1%. The result was in line with market expectations. On the other hand, data from the US disappointed investors. The dynamics of the durable goods orders stood at -4% m/m vs -2.4% expected. Moreover, the annualized GDP growth for the second quarter of 2016 amounted to 1.2% vs 2.6% expected. Thus, the market sentiment in the US was slightly worse than in Europe. During the whole week, German DAX rose by 1.9%, British FTSE250 soared by 1.8% and French CAC40 increased by 1.3%. In the US, the NASDAQ took off by 1.2%, the S&P500 declined by 0.1% and the DJI deteriorated by 0.8%.

In Poland, small and medium – sized companies did not fail once again – the mWIG40 grew by 0.9% and the sWIG80 went up by 1.9%. Unlike to them, the WIG20 ended last week in negative territory. The blue – chip index fell by 1.9%. Investors learnt the unemployment rate. It stood at 8.8% in June vs 9.1% in May. Meanwhile, some companies presented their financial statements for the second quarter of 2016. The financial performance of BZ WBK surprised positively. The company reported a net profit which exceeded the market expectations by almost 10%. Meanwhile, the financial results of Orange Poland met the projections. PGNiG released its financial statement as well. The company made a loss of PLN 120 million. It adversely affected the price of its shares.

The highlight of the current week will be the publication of data from the US labor market. In addition, it is worth paying attention to the readings of the manufacturing PMIs for the Eurozone, Poland and China. There will be the release of the dynamic of the retail sales for the Euroland as well. Moreover, the Middle Kingdom will publish the services PMI and the balance of trade. In Poland, investors will learn some financial statements of the companies listed on the WSE e.g. Zywiec, Kety, ING and Pekao.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq.

Last week the index of the largest companies was dominated by the red color. As a result, the WIG20 was not able to defend the psychological support of 1,800 pts.. The index ended last week at 1,759 pts.. Moreover, declines were accompanied by increased volume of trade. The RSI oscillator went down dynamically, whereas it did not indicate any signals. On the other hand, moving averages formed a golden cross pattern which was a very strong buy signal. Therefore, there were plenty of indications that the blue – chip index was in the holiday apathy.

Graph 2: CD Projekt daily. Source: Stooq.

As the company of the week we chose CD Projekt. During the whole week, its share price increased by 5.4%. This year has been very successful for the Polish manufacturer of the video games. The share price has been steadily growing. Lately, the course has begun to move towards north much faster. Thus, the share price reached its historical peak at PLN 34.84. The RSI oscillator significantly broke the level of 70 pts. and indicated an overbought. Therefore, a correction can be expected. On the other hand, there is still potential to growth. This was confirmed by the latest and numerous recommendations to buy.

Authors: MM Prime TFI S.A. Investment Management Team

This material is intended to be for informational purposes only and does not constitute any investment, legal or tax advice or any other type of advice nor constitute an offer according to the Civil Code or a public offer within the meaning of the Act on Public Offering. MM Prime TFI SA has done due diligence to ensure that the information contained in this presentation is accurate and based on reliable sources. MM Prime TFI SA is not responsible for the accuracy and completeness of the information, nor for any damage that may arise from the use of it. Nothing in this document should be construed as an investment advice. The use of this material as the basis or evidence to make an investment decision takes place at the sole risk of the person who takes such a decision. This material is available free of charge.