Summary

Last week the European stock markets were dominated by bears. During the whole week, French CAC40 declined by 2%, British FTSE250 decreased by 1.8% and German DAX deteriorated by 1.5%. Brexit continued to generate the uncertainty. Moreover, it had adversely impact on the market sentiment. To add insult to injury, the new burden for the stock markets was information on the problems of the European banks (especially Italian banks) and difficulties of the several British investment funds. Investors learnt the latest economic data as well. In the Eurozone, the dynamic of the retail sales stood at 1.6% y/y vs 1.8% expected. The services PMI amounted to 52.8 pts. vs 52.4 pts. expected. Meanwhile, the market sentiment was bullish in the US. During the whole week, the NASDAQ rose by 1.9%, the S&P500 increased by 1.3% and the DJI took off by 1.1%. Investors focused on data from the American labor market. This time the readings did not fail. On the one hand, the unemployment rate grew from 4.7% to 4.9%, whereas on the other the payrolls significantly exceeded the market expectations. Investors also learnt minutes from the last meeting of the FOMC. The members of the Fed’s chief body for monetary policy turned out to be doves. As a result, the probability of the interest rates raise declined. Furthermore, there was a publication of the services PMI in China. It rose from 52.1 pts. in May to 52.7 pts. in June.

In Poland, major stock indices moved towards south. During the whole week, the WIG20 decreased by 2.2%, the mWIG40 went down by 1.6% and the sWIG80 declined by 1%. The highlight of the week was the presentation of the new pension reform whereby OFE will be liquidated. Initially, the market reacted very nervously. However, it should be emphasized that the reform may not be another burden for the Polish stock market. On the other hand, the proposed solutions were not enough detailed, so they generated considerable uncertainty. Moreover, in the past week there was the MPC meeting, the first time under the leadership of Adam Glapinski. The interest rates remained unchanged. What is more, there were plenty of indications that in the near future there would not be any changes in the monetary policy. It should be also noted that the political event of the week was the NATO summit in Warsaw.

In the current week investors will learn the dynamics of the industrial production and the retail sales for the US and China. The Middle Kingdom will also release the GDP growth for the second quarter of 2016. It is worth paying attention to the data from the Eurozone: the CPI and the industrial production growth rate. In Poland, there will be a publication of the CPI. In addition, Fitch will review Poland’s credit rating on Friday.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq.

Last week the index of the largest companies liked the red color. Thus, the support level of 1,738 pts. (76.4% Fibonacci retracement) was broken. On Thursday, the WIG20 moved towards north dynamically, so the index managed to end last week at 1,705 pts.. The RSI oscillator remained neutral, whereas it was going down steadily. The ATR indicator reached a local peak at the point when the blue – chip index overcame this year’s low peak. Subsequently, the indicator started to decline. Perhaps these signals were harbingers of the potential correction.

Graph 2: CCC daily. Source: Stooq.

The first week of July was successful for CCC. During the whole week, its share price increased by 9.05%. The course was in an upward trend in the first part of the year. The dominance of bulls was completed in June. It transpired that the resistance level of PLN 180 was too strong for the market. Nonetheless, it was a consequence of the “V” bottom pattern realization. Meanwhile, company’s financial results for June turned out to be an incentive to further purchases of its shares. The RSI oscillator remained neutral, although the MACD oscillator indicated a buy signal. The market may retest the level of PLN 180 once again.

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

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