Summary

The past week was quite calm in the financial markets. The economic calendar was not rich and Donald Trump, who had recently delivered investors a lot of excitements, this time did not shake the markets. However, it is worth paying attention to the publication of the European Sentix index. The result of 17.4 pts. was in line with the market consensus. Investors learnt the US University of Michigan consumer confidence index. It stood at 95.7 pts. vs 97.8 pts. expected. The market focused on a speech of the ECB president, which turned out to be quite dovish. Mario Draghi said that the fate of QE was not a foregone conclusion and the ECB may continue ultra – expansionary monetary policy. Therefore, it was not a surprise that dollar appreciated against euro last week. Meanwhile, the stock market sentiment was bullish, whereas the scale of growths was rather moderate. During the whole week, the NASDAQ rose by 1.2%, the DJI soared by 1% and the S&P500 increased by 0.8%. In Europe, British FTSE250 went up by 1.7%, while German DAX and French CAC40 grew by 0.1%.

In Poland the bull market was in full swing. Last week, the WSE distinguished itself from the other foreign stock markets. During the whole week, the WIG20 took off by 3.8%, the mWIG40 increased by 4.3% and the sWIG80 went up by 1.5%. Special attention should be paid to the banking sector which was one of the strongest segments of the Polish stock market. According to the NBP, the profit of the banking sector increased by 24% y/y in 2016. This data was reflected in solid financial results published first by ING, and then by Pekao. In addition, an incentive for the banks’ share prices was the commentary of Jaroslaw Kaczynski. He said that the people indebted in Swiss francs should start to fight with the banks in the courts. He added that the government cannot take any actions which may lead to the disequilibrium in the banking system. This probably meant that the government would not create any new law which might turn out to be a burden for the banks with exposure to foreign currency loans. Furthermore, there was a meeting of the MPC last week. In line with the market consensus, the interest rates remained unchanged. Moreover, the council once again emphasized that it did not see any prospects for monetary tightening in 2017.

In the current week, the economic calendar will be very rich. In the Eurozone, there will be publications of the ZEW indices and the dynamic of the manufacturing production. Investors will also learn data on the GDP growth in the fourth quarter of 2016 for the EU countries, including Poland. Moreover, broad data on the CPI, the retail sales and the manufacturing production will be released in the US, as well as in Poland.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

The first part of the week brought negligible volatility and slight increases in the index of the largest Polish companies. Subsequently, the WIG20 started to move towards north and the volume of trade grew rapidly. As a result, the blue – chip index broke the resistance level at 2,000 pts. and ended Friday’s trading session at 2,154 pts.. In other words, the market continued an upward trend. The nearest resistance level stands at 2,200 pts.. On the other hand, the RSI oscillator was overbought which generated a risk of correction. A potential support level stands at 2,100 pts.

Graph 2: Lotos daily. Source: Stooq

This time Lotos deserved on the distinction. During the whole week, its share price grew by 11.9%. The stock price has moved in an upward trend for one year. The test of the resistance level at PLN 40 ended in failure twice, whereas after bouncing from the support level at PLN 37, the share price started to grow. Thus, it managed to break the psychological barrier of PLN 40, while the MACD oscillator indicated a buy signal and the moving averages formed a golden cross pattern. The stock price has been the highest since 2011. Despite the fact that the RSI oscillator was overbought, the share price may move towards the resistance level at PLN 50 in the medium - term.

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

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