Summary

This time the issue of the political risk in the US remained in the background or the market got used to unpredictable Donald Trump. Thus, investors focused on the macroeconomic data readings and the policy of the most important central banks. According to the speeches of the FOMC members, the Fed has wanted to maintain announced pace of the monetary tightening – two more interest rates raises by the end of this year. However, these words had been said before the publication of the payrolls which once again failed. The unemployment rate shrank to 4.3%, whereas the non – farm payrolls stood at 138K vs 185K projected. Of course this does not mean that the Fed will resign from a June interest rates hike, but a series of weaker data from the American economy has been going on - this may be a warning signal. Nevertheless, Wall Street continued to grow and reached another historical peaks. During the whole past week, the NASDAQ rose by 1.5%, the S&P500 increased by 1% and the DJI rose by 0.6%. In spite of the division of the ECB Governing Council on the normalization of the monetary policy, Mario Draghi maintained his dovish attitude. Moreover, the readings of the HICP inflation were again low. The ECB has not seemed to be in hurry to start monetary policy normalization, especially since the economy of the Eurozone has remained in a stagnancy. This kind of scenario might support the European stock markets. Last week, German DAX increased by 1.8% and French CAC40 went up by 0.1%.

Meanwhile, the Polish stock market indices did not move in one direction last week. During the last five trading days, the WIG20 went down by 1% and the sWIG80 deteriorated by 0.5%, while the mWIG40 grew by 1.1%. This time Petrolinvest was in the spotlight – there was a decision of the Polish FSA that the company’s shares will be excluded from quotations. It is worth paying attention to Alior Bank as well. The share price of the bank fell remarkable after the publication concerning changes in the board of directors. Furthermore, investors may have felt disappointed, because PZU announced that it would pay a much lower dividend than year ago. Last week, there was also a publication of the minutes from the last meeting of the MPC. However, the document did not bring anything new and remained in the background. Attention should be also paid to the release of the manufacturing PMI. The index stood at 52.7 pts. vs 54.5 pts. expected.

Certainly, the meeting of the ECB Governing Council will be the event of the week. The market does not expect any changes, but it is looking forward to a conference with Mario Draghi participation. In addition, investors will learn many macroeconomic data readings from the US, the Euroland and China. It is worth remembering that there will be parliamentary elections in the UK and France next weekend.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

This time the WIG20 was dominated by bears, so it ended a Friday’s trading session at 2,303 pts.. The last week was characterized by very large differences in the volume of trade. The turnover amounted to PLN 350 million on Monday and more than PLN 2 billion on Wednesday. It should be added that the high level of trade brought declines of the index. The situation of bulls has seemed to be getting tougher. However, a breakthrough of the support level at 2,170 pts. should be considered as a signal of a trend reversal. For now, the market will be trying to defend the psychological level of 2,300 pts. and to return to the surrounding area of an upward trend line.

Graph 2: CD Projekt daily. Source: Stooq

This time attention should be paid to CD Projekt whose share price increased by 14% in the past week. Dynamic growths led to the end of consolidation. Moreover, the stock price broke the psychological level of PLN 80. A potential confirmation of the breakthrough will be a signal to start a new upward wave. Lately, the financial results for the first quarter of 2017 exceeded projections and a new recommendation to buy appeared – these were incentives to movements towards north. It should be also noted that the RSI oscillator was overbought. However, in the case of CD Projekt most of these kind of signals turn out to be traps.

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

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