Summary

It was another week full of uncertainty awaiting for a solution to the Greek case. The market was being flooded with positive and negative information on progress in the negotiations between the Greek government and the Troika. On Monday all stock exchanges opened sharply lower after the breakdown of the weekend talks. As a result major indices in Europe, in the US and in Poland ended previous week in the red. Germany’s DAX lost 3.8%, so a little more than it had gained a week earlier. Nonetheless, it still remains above the level of 11,000 points. The FTSE250 index lost 1.2%, and France’s CAC40 noted the largest drop with 5%, but it bounced back from the support line around 4,800 points for the second time in the last three weeks. Overall a positive readings of the June PMI indices for services and industry in European economies were only a background to the problems with the Greek debt. In Poland, unfortunately, the broad market index continued the retreat from the May peak. Last week the WIG index lost 2%, but while it is higher than the 50,000 point we should have no concerns about a bigger correction. The WIG20 lost 2.4% during the entire week and fell below the level of 2,300 points. The mWIG40 dropped by 2.2%. However, the situation would be much worse, if medium companies index didn’t make up for a large part of Monday’s drop. sWIG80 recorded the smallest loss, because over the past week it lost just 0.9%.

In the US stock markets were also not indifferent to the failure of the talks between Greece and its creditors. In addition, the US economy showed mixed data. On the one hand, the ISM and the PMI indices for American economy were better than the market consensus, on the other hand, American labour market disappointed, because the monthly Nonfarm Payroll report was worse than the expectations. As a result, the disappointment could delay the U.S. Federal Reserve decision to raise rates. During the whole week the S&P500 lost 1.2% making a graph increasingly flat. The NASDAQ fell by 1.4%, but it still maintained above the level of 5,000 points, and the Dow Joneslost 1.2%.

This week the ISM index for services in the US and minutes from June FOMC meeting will be released. In Europe, an important publication will be May's industrial production in Germany. During this week Polish MPC will have two-day decision-making meeting, but we do not expect any change. Nevertheless, macroeconomic data releases will be probably tangential, due to a Sunday referendum, which was held in Greece. The results indicate that the public does not agree to the terms proposed by the Troika. It will probably have a negative impact on the stock markets, but it may be only a short-term effect.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

In spite of the rebound from the support at about 2,300 points during the previous week, in the last week the WIG20 did not manage to stay above that level. It was particularly difficult task to stay above the level of 2,300 points, because on Monday the index broke through the support line opening with a bear market gap. The WIG20 has finished the week below the level of 2,300 points for the first time since September 2013. Trading generally was carrying out under the motto of waiting for further developments related to the Greek debt. The index is reaching the support zone of the over two-year consolidation, therefore, decreases should begin to slow down. The nearest support is a January hole at 2,225 points.

Graph 2. JW Construction daily. Source: Stooq

The JW Construction Holding shares noted very good performance for a second consecutive week. Since the beginning of the week the price increased by 6.4% on a very fragile market. The share price has been in an uptrend since last December, and it has already increased by about 50% since the beginning of the year. Despite unfavorable conditions the course was able to stay above the April peak and it closed the week at the price of PLN 3.68, so just above the resistance at around PLN 3.65. The nearest resistance is the peak from May 2014 at PLN 3.82. The RSI oscillator suggests an overbought, so we can expect a temporary weakening of momentum, or even a small price correction.

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

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