Summary

After Emmanuel Macron had won the race to the French presidential chair, the political risk definitely lost its importance. As a result, the volatility in major financial markets shrank significantly. During the whole week, German DAX increased by 0.4%, British FTSE50 grew by 0.3%, while French CAC40 declined by 0.5%. In the US, the NASDAQ rose by 0.3%, whereas the DJI went down by 0.5% and the S&P500 fell by 0.4%. The monetary policy of the most important central banks was in the spotlight, especially since the macroeconomic data from the US and the Euroland was quite robust. Last week, investors focused on the numerous public appearances of the Fed’s representatives. The speeches turned out to be hawkish. The market has been sure that the interest rates will be raised in June – it will be a second raise in the current year. However, this hawkish decision seems to be discounted and the key question is: will the FOMC decide to extend the scale of the monetary tightening? On the other side was the ECB. During a tumultuous debate in the Dutch parliament Mario Draghi defended an ultra – expansive monetary policy. So far, there are not any indications that the ECB will decide to start normalizing monetary policy in the near future. Meanwhile, unlike to the first week of May, the price of crude oil increased last week - it fluctuated near 50 dollars per barrel.

The second week of May brought slight declines in the Polish stock market indices. During the whole week, the WIG20 fell by 0.6%, the mWIG40 deteriorated by 0.4% and the sWIG80 declined by 0.9%. Unlike to the most important central banks, the monetary policy of the NBP has been highly predictable. Everything points to the fact that the MPC will be continuing the policy of the interest rates stabilization. However, it is not surprising, especially since inflation is projected to remain below the NBP’s target. The latest reading of the CPI stood at 2% y/y. Nonetheless, attention should be paid to the Friday’s decision of Moody’s. The agency left the Polish credit rating at ,,A2” level, but changed its prospective from ,,negative” to ,,stable”. This was undoubtedly good news, whereas the decision should not significantly affect quotations of zloty or the market sentiment on the WSE.

This week will be full of numerous macroeconomic data releases from the US, the Euroland and Poland. Moreover, it is worth paying attention to the publication of the minutes from the last meeting of the ECB Governing Council. In Poland, the MPC will make a decision on the interest rates, however, the market consensus does not assume any changes. Furthermore, the earnings season of companies listed on the WSE is gaining momentum. This time the financial results for the first quarter of 2017 will be published, among others, by CCC, Ciech, PZU, LPP and Amrest.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

After the end of consolidation, it seemed that the WIG20 would start a new dynamic upward wave. However, the growths were stopped by the nearest resistance level at 2,400 pts.. As a result, the index of the largest Polish companies ended the last week at 2,368 pts.. What is more, it is worth noting that the volume of trade increased when bears were a dominant party in the market. The situation of bulls have seemed to be more and more difficult. The nearest support level stands at 2,350 pts.. The breakthrough will open the way to a very important barrier at 2,300 pts.

Graph 2: Cyfrowy Polsat daily. Source: Stooq

This time it is worth paying attention to the share price of Cyfrowy Polsat which grew by 6.2% last week. The company published its financial results for the first quarter of 2017 which exceeded projections. Thus, the information turned out to be an incentive to dynamic growths. The stock price managed to break the upper limit of the horizontal trend (PLN 26). Nevertheless, this resistance level was extremely solid, because it often stopped the dominance of bulls. The upcoming days will be crucial, especially since the technical oscillators have signaled a potential correction. The defense of the barrier at PLN 26 may be an incentive to start a new upward trend.

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

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