Summary

The last week was not fulfilling for the investors. The market sentiment deteriorated after the increase in tension between the US and North Korea. The squabbles between the two sides led to the increase in global risk aversion. As a result, the price of gold went up and Swiss franc and yen appreciated remarkable last week. Thus it is not surprising that major global stock market indices ended the last week in negative territory. During the whole week, the NASDAQ declined by 1.5%, the S&P500 fell by 1.4% and the DJI decreased by 1.1%. In Europe, German DAX went down by 3.4%, French CAC40 shrank by 2.7% and British FTSE250 deteriorated by 2.1%. The last week’s economic calendar was not very rich, however, special attention should be paid to the readings on inflation from the US. The PPI amounted to -0.1% m/m vs 0.1% expected and the CPI stood at 0.1% m/m vs 0.2% projected. These were another signals concerning the lessening the inflationary pressure in the US which may encourage FOMC to adopt more dovish attitude.

The increase in global risk aversion particularly hit the emerging markets, including the WSE. During the whole past week, the WIG20 fell by 0.4%, the mWIG40 declined by 0.8% and the sWIG80 deteriorated by 0.5%. Special attention should be paid to the recent publications of financial results of companies listed on the WSE for the first half of 2017. These in the case of Energa were better than those in a corresponding period in 2016, but lower than market expectations. The financial statement was also published by the other energy company – PGE. The company significantly improved its financial results which were in line with projections. In the meantime, Alior released its financial results which exceeded the market consensus. The publication was an incentive to dynamic growths of the bank’s share price. After all, during the whole week, the stock price went down by 0.2%. Investors also learnt the CPI. The result of 1.7% y/y was in line with expectations and due to the passive attitude of the MPC the reading seemed to be insignificant for the market.

Today morning, investors learnt data from China, while in the afternoon there will be a publication of the manufacturing production growth rate for the Euroland. In the next days, it is worth paying attention to the dynamics of the manufacturing production and the retail sales for the US and Poland. In addition, there will be releases of the GDP growth rate in the second quarter of 2017 and data on the wages in Poland. Furthermore, it is worth paying attention to the publications of minutes from the last meetings of the FOMC and the Governing Council of the ECB. This week, financial results for the first half of 2017 will be published by KGHM, JSW, Lotos, Tauron and PGNiG.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

After a very successful beginning of the past week which brought a new local peak of the WIG20 (2,425 pts. – the highest level for two years) the market was dominated by bears. As a result, the blue-chip index ended the last week at 2,371 pts.. Technically, the market confirmed a consolidation. It means that the index will probably move towards the support level at 2,260 pts.. Nevertheless, the market sentiment worsened because of increased global risk aversion after the intensification of tension between the US and North Korea. If the geopolitical situation stabilizes, bulls will probably return to the market.

Graph 2: JSW daily. Source: Stooq

We chose JSW as a company of the week. During the last five trading days, its share price grew by 5.4%. Therefore the stock price broke the resistance level at PLN 88.7 and reached the level at PLN 92. Nevertheless, the market quickly returned to the area of PLN 89. It is worth noting that the RSI oscillator indicated a sell signal and the volume of trade was quite low. Under such conditions it is difficult to talk about domination of bulls, although the share price has been rising since June. In the coming days, the market will test a barrier at PLN 88.7. Its defense will probably be a signal to start a new upward trend. Otherwise, the market may return to the consolidation.

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

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