Summary

It was another week of bears’ dominance - the French CAC40 and the British FTSE250 declined by 1.1%, while the German DAX deteriorated by 1%. In the US, the DJI shrank by 0.3% and the S&P500 went down by 0.2%. Unlike to them, the NASDAQ rose by 0.5%. The market focused on the American tax reform last week. This was accepted by the House of Representatives, however, the risk of its rejection by the Senate remained meaningful. The materialization of this risk factor may significantly impact the market sentiment, even in a broader time horizon. Last week, investors learnt a lot of macroeconomic data as well. First of all, it is worth paying attention to the growing inflationary pressure in the US which may encourage the FOMC to extend the scope of monetary restrictions. In addition, the American data on the October’s retail sales and manufacturing production did not fail as well. There were also some robust readings from the Euroland’s economy last week. These were another confirmations that the global economic growth rate has been gaining a momentum.

In Poland, during the whole past week, the WIG20 decreased by 0.6% and the mWIG40 fell by 1.1%. Interestingly, the sWIG80 grew by 0.8% - this year, the index has been rather negatively distinguished against other Polish stock market indices. Last week, CD Projekt was in the spotlight. Information on problems with the production of “Cyberpunk” hit the valuation of the game developer. A negative hero of the week name deserved XTB – its share price dropped by 34.8%. The Polish Financial Supervision Authority informed about suspicion that the company had committed fraud against the customers. Investors also focused on the financial statements for the third quarter of companies listed on the WSE. So far, the earnings season brought more reasons to the fells of the stock market indices than to their growths. In many cases the market expectations turned out to be too demanding. The financial results of CCC, KGHM or JSW were significantly lower than projections. On the other hand, the financial performance of PZU and Dino surprised investors positively. Attention should be also paid to the latest macroeconomic data from Poland. The GDP growth rate for the third quarter stood at 4.7% vs 4.5% expected. The data on the employment and salaries did not fail as well. After all, solid economic figures did not manage to improve the market sentiment at Ksiazeca street.

This week, investors will focus on the initial readings of the PMIs for the Euroland and the US, the publication of the minutes from the last meeting of the FOMC and the public appearances of Mario Draghi and Janet Yellen. In Poland, investors will learn the dynamics of the manufacturing production and the retail sales, the PPI and the unemployment rate. This week, the financial statements for the third quarter will be published by Asseco Poland, LPP, AmRest, Enea, Bogdanka or CD Projekt, among others.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

The last week was not successful for the index of the largest Polish companies. The market was dominated by the red color, so the WIG20 ended the Friday’s trading session at 2,443 pts.. The situation of bulls has been getting harder – the market broke a lower limitation of a consolidation at 2,420 pts.. Subsequently, there was a rebound, however, it was accompanied by the low volume of trade. The defense of this barrier is a key issue for the bulls. If the market breaks the support level, an upward wave towards the psychological level of 2,300 pts. will probably come.

Graph 2: Trakcja daily. Source: Stooq

We chose Trakcja as a company of the week. During the last five trading days its share price grew by 6.6%. Last week, the company published weak financial results for the third quarter, albeit it informed about very high backlog - the news was appreciated by the investors. The stock price seemed to rebound. Thus this generates a chance to complete the period of a downward trend. It is worth paying attention to the RSI and MACD oscillators which indicated buy signals. The nearest resistance level stands at PLN 8.4. A breakthrough of this barrier may open the way to further increases towards the resistance level at PLN 11.4.

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

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