Summary

Last week the world’s major stock exchanges were dominated by bulls. In the US, the NASDAQ rose by 3.4%, the S&P500 increased by 2.3% and the DJI took off by 2.1%. In Europe, German DAX and French CAC40 went up by 3.7%, while British FTSE250 grew by 1.8%. The latest economic data helped major stock indices to grow. In the Eurozone, the manufacturing PMI and the services PMI stood at 51.5 pts. and 53.1 pts.. Moreover, data from the largest European economy did not fail as well. The German GDP increased by 1.6% y/y in the first quarter of 2016. Furthermore, several indices e.g. the Ifo, the ZEW and the GfK confirmed the positive sentiment in the German economy. Nonetheless, investors focused on a revision of the American GDP growth for the first quarter of 2016. It amounted to 0.8% q/q and 2% y/y. Last week there were further hawkish comments of the FOMC’s members (including the president of the Federal Reserve). The representatives of the Fed signaled the upcoming interest rates raise. It is worth paying attention to the oil price as well. It approached the level of 50 dollars per barrel.

The past week brought an improvement of the market sentiment on the Polish stock exchange. Despite Thursday’s break on the WSE, the main stock indices ended the week in positive territory – the WIG20 rose by 1.8%, the mWIG40 went up by 1.8% and the sWIG80 grew by 0.5%. Investors learnt the unemployment rate which stood at 9.5% in April. The result confirmed the strength of the Polish labor market. In addition, investors focused on the publication of the minutes from the last meeting of the MPC. The release did not surprise investors. The representatives of the NBP thought that the deflation did not have an adversely impact on the decisions of the economic entities, while the economic slowdown was temporary. As a result, it can be concluded that the MPC is not going to lower the interest rates.

The first week of June will bring plenty of significant economic data readings. In the Eurozone, there will be publications of the confidence indices, the unemployment rate, the PPI and the dynamic of the retail sales. What is more, the ECB will make decision on interest rates. In the US, the publication of the data from the labor market will be in the spotlight. It is worth paying attention to the reading of the Conference Board Index and the Chicago PMI as well. It should be noted that the US stock markets are closed today. In the current week investors will also learn the PMIs from China. In Poland, there will be the final reading of the GDP growth for the first quarter of 2016 and the release of the manufacturing PMI.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq.

Despite the long weekend, the WIG20 managed to stop the monthly period of the bearish market. Thus, the index ended last week at 1,839 pts.. The RSI oscillator remained neutral, whereas the MACD oscillator indicated a buy signal. The nearest resistance stands at the psychological level of 1,900 pts.. Nevertheless, if fundamental factors do not significantly affect the improvement of the market sentiment, further increases of the WIG20 will be limited. Therefore, the consolidation at 1,800 – 1,900 pts. in the medium term can be expected.

Graph 2: LPP daily. Source: Stooq.

LPP deserved the company of the week name. During the whole week, the share price of the company grew by more than 7%. The course was in a long – term downward channel. On the other hand, the market sentiment was bullish in recent times. As a result, the “V” bottom pattern was formed. It may have been a harbinger of a short – term trend reversal. In addition, the MACD oscillator figured out a buy signal. The nearest resistance stands at PLN 5,885. The breakthrough of this barrier will be a signal for further growths towards the psychological level of PLN 6,000.

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

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