Summary

Certainly, the meeting of the ECB Governing Council was in the spotlight last week. The market consensus assumed that the bank would extend QE at 80 billion euros for another six months. In the meantime, the bond purchase program was extended for nine months, whereas its scope was cut to 60 billion euros per month. A reaction of the foreign exchange market was quite nervous. Originally, the decision was interpreted as the beginning of the QE limitation, whereas in fact, it turned out to be more dovish than expected. Over the next nine months the bank will supply a market with the amount of 540 billion euros – it will be more than 480 billion euros in six months. In addition, Mario Draghi emphasized that the council did not consider phasing out of QE. Currently, investors are looking forward to the FOMC meeting, which will take place this week. The market is convinced that the Fed will raise interest rates. Thus, it is not surprising that dollar has remained strong. Furthermore, the market sentiment was extremely bullish last week. As a result, some of the American stock indices managed to reach their historical peaks. During the whole week, the NASDAQ rose by 3.6%, while the S&P500 and the DJI soared by 3.1%. In Europe, German DAX went up by 6.6%, French CAC40 increased by 5.2% and British FTSE250 grew by 1.7%. Moreover, it should be noted that the rise in oil price slowed down – the market seemed to have more and more doubts whether an agreement on limiting of oil production would be signed.

Last week the WSE was dominated by the green color, especially the blue – chip index. During the whole week, the WIG20 took off by 6.5%, the mWIG40 rose by 1.5% and the sWIG80 grew by 0.7%. Special attention should be paid to the volume of trade. It amounted to PLN 2.1 billion on Thursday. Nonetheless, the result was revised to PLN 2.7 billion on Friday, whereas a turnover of PEKAO’s shares stood at PLN 1.7 billion – the Polish Treasury would take over the bank. Due to the financial difficulties, UniCredit decided to sell its controlling interest. The deal undoubtedly will improve Italian bank’s capital adequacy ratios. What is more, there was a meeting of the MPC last week. In line with market expectations, the interest rates remained unchanged. There were plenty of indications that the policy of interest rates stabilization would be continued in 2017.

Admittedly, the most important event of the current week will be the FOMC meeting. However, a decision on the interest rates will be made by the Swiss National Bank as well. Moreover, it is worth paying attention to the latest macroeconomic data readings from the Euroland, the US, China and Poland.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

Last week was very successful for the index of the largest Polish companies – the WIG20 was totally dominated by bulls. As a result, the index ended Friday’s trading session at 1,899 pts. – it was the highest level since April. It is worth noting that the WIG20 not only broke a solid resistance level of 1,800 pts., but it also tested the barrier of 1,900 pts.. Perhaps, the market will again try to break this level in the following days. Currently, the most important resistance level stands at 2,000 pts.. Its breakthrough will be a signal of a new upward trend’s beginning.

Graph 2: Agroton daily. Source: Stooq

This time we chose Agroton as a company of the week. During the last five trading days, its share price increased by 30.7%. It should be reiterated that the stock price moved towards south almost from the Ukrainian company’s IPO. However, it rebounded in January 2016. As a result, the current year has been very successful for the shareholders of Agroton. Nevertheless, the share price was not able to break the psychological level of PLN 4 for a long time. Recent increases led to the breakthrough of this barrier, so the stock price will probably start a new upward wave.

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

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