Summary

Last week, the global market sentiment improved noticeable. However, concerns about the state of the Italian economy and its new government, as well as the risk of the outbreak of the global trade war were still important for investors. After all, this time the hawkish statements of the ECB representatives were in the spotlight. It cannot be ruled out that next ECB Governing Council meeting will bring a declaration regarding further future of QE – the market expects the program will be completed this year. As a result, the last week’s weakness of the European stock market indices (against Wall Street) and the appreciation of euro were not a surprise. Nonetheless, it is worth remembering that the prospect of the interest rates raises in the Euroland remains remote. The macroeconomic data releases from the Eurozone systematically fail and the inflationary pressure remains low. On the other hand, there have been more and more indications the pace of the monetary tightening in the US will be accelerated. A current basis scenario assumes the Fed will make three hawkish decisions in 2018. Thus the upcoming meetings of the FOMC and the ECB Governing Council promise to be extremely interesting. During the last week, the British FTSE250 soared by 0.8%, the German DAX rose by 0.3%, while the French CAC40 declined by 0.3%. In the US, the DJI went up by 2.8%, the S&P500 increased by 1.6% and the NASDAQ grew by 1.2%.

Last week, the WSE was also dominated by the green color, especially in the case of the blue-chip index. During the last five trading days, the WIG20 took off by 2.7%, the mWIG40 rose by 0.4% and the sWIG80 went up by 0.1%. The improvement in the global market sentiment supported emerging markets, including Poland. Therefore it is not surprising the last days also brought a significant appreciation of the Polish currency. The MPC meeting was in the spotlight last week. As expected, the council did not change the level of the interest rates. During the conference, Adam Glapinski again suggested the policy of the cost of money stabilization could last even until 2020. Investors learnt the update of the Polish credit rating by Fitch as well. Some investors expected an increase in the outlook from stable to positive (“A-“ rating). However, the agency did not make any modifications.

The current week will be extremely interesting. Investors are looking forward to the meetings of the FOMC and the ECB Governing Council. Special attention will be paid to the press conferences with Jerome Powell and then Mario Draghi. Investors will also learn some important macroeconomic data readings, including data on the inflation from the US, Euroland and Poland. Furthermore, there will be some data publications from China: the dynamics of the retail sales and the manufacturing production. This time the political issues may be in the background.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

Last week, the growth in the index of the largest Polish companies were significant, however, the strength of bulls was not confirmed by the increased volume of trade. The blue-chip index rebounded from the local low peak (2,144 pts.) and ended Friday’s trading session at 2,250 pts. The RSI oscillator remained neutral. The situation of bulls is difficult. The nearest resistance level stands at 2,340 pts. Moreover, it is worth remembering the holiday is coming, so the activity of investors will probably be smaller. Thus a return of a bull-market may be significantly impeded in the near future.

Graph 2: JSW daily. Source: Stooq

We chose JSW as a company of the week – during the last five trading days its share price rose by 8.5%. Stable but relatively high prices of coking coal, the ongoing negotiations on cooperation with Prairie Mining and an attractive valuation – these are the incentives to the stock price growth. After the last correction the share price stabilized. Currently, the market is testing an important resistance level at PLN 91. A breakthrough will open the way to further movements towards the psychological barrier at PLN 100. The volume of trade remained stable, while the RSI oscillator was neutral. However, the moving averages formed a golden cross pattern – a strong buy signal.

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

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