Summary

Last week was quite a rich in economic data. Furthermore earnings season of companies listed on the WSE ended up and as usual the last day was full of publications. However, the past week was not a successful one for investors in Europe as well as across the Atlantic. The main European and US indices were continuing the medium-term downward trends. The DAX lost 2.5% and remained above the psychological level of 10,000 points with great difficulty. The French CAC40 fell as much as 3.3%, while London's FTSE250 was 1.7% down. In comparison to other markets the Polish WSE did quite well. The broad market index lost only 0.4%, while the WIG20 gained 0.1%. The mWIG40 fell 1.7%, and the sWIG80 dropped 0.2%. The present uncertainty about the weakening Chinese economy and falling local stock exchanges did not help the market sentiment. In addition, the macroeconomic data as PMIs generally did not impress. Concerning readings for the eurozone and Poland the data were worse than the consensus. Poland’s manufacturing PMI index recorded the largest monthly decline since 2005, however, it can be partly explained by the negative impact of the August heat waves. China’s manufacturing sector, in accordance with the forecasts, is contracting. The PMIs from Germany and the United States turned out better than expected. Although using a different methodology the ISM manufacturing index underachieved analysts' expectations. When it comes to the significant August services PMI indices, readings for the eurozone and Germany were better than expected, as well as for the United States. Last week the MPC held a meeting and left interest rates on unchanged levels as expected. The ECB left interest rates unchanged as well. But Mario Draghi’s press conference was more important.President of the ECB downgraded the previous eurozone GDP and inflation forecasts. Draghi added that the QE program may be extended if it is necessary. This message had a positive impact on the market on Thursday, but Friday brought a deterioration in sentiment again.

The US ADP report underachieved, while the Labour Department official data released on Friday turned out to be mixed. On the one hand, the unemployment rate was lower than analysts had expected and the July reading, on the other the non-farm private payroll employment rose less than expected in August. The upward revision to July’s payroll figure we see in a positive light. Having taking all this into consideration the Fed faces a tough decision regarding when to begin rate hiking cycle. In the week ending 4th September the S&P500 lost 3.4%. The NASDAQ fell by 3.0%, while the DJIA was down 3.2%.

This week will be poorer in macroeconomic data, but it is worth paying attention to the inflation in China, Germany and the United States.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

The WIG20 still continued its medium-term downward trend. Last week the course rebounded off the resistance around 2,166 points and approached the upper boundary of the downward channel. The index still did not manage to fill the large gap from the previous week. The WIG20 rose only 0.1% during the week ending 4th September. The spinning top on the weekly chart confirms the market indecision. The WSE blue chip index ended last week at 2,146 points noting the first growth week since mid-August.

Graph 2. Kredyt Inkaso daily. Source: Stooq

Last week the Kredyt Inkaso shares rallied strongly. The price increased by 16.7% during the week ending 4th September. It was one of the best results on the Warsaw Stock Exchange. The price continued the medium-term upward trend initiated in the middle of January. Since then the share price rose by almost 100%. A week earlier the lower boundary of the upward channel was contravened, but last week the price managed to bounce back. Now, the local maximum at PLN 35,93 which is also the historical maximum is the closest barrier to overcome for the bulls. The 9-session RSI oscillator still gives some space for growth, but it is very close to the overbought zone.

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

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