Summary

The second week of May brought slight increases of European stock indices – German DAX grew by 0.8%, French CAC40 rose by 0.4% and British FTSE250 went up symbolically by 0.01%. In the first part of the week investors learnt data from major European economies. Nonetheless, most of them failed. The dynamic of the industrial production in the Eurozone disappointed investors as well – it stood at 0.2% y/y vs 1% expected. On the other hand, Friday’s publications from the German and Italian economies turned out to be a support for European indices. The dynamics of the German and Italian GDP for the first quarter of 2016 stood at 1.6% y/y and 1% y/y vs 1.33% and 0.9% expected. What is more, the reading of the GDP growth in the Eurozone was slightly lower than the market consensus. It amounted to 1.5% y/y vs 1.6% expected. In the US, major stock indices moved towards south. The DJI fell by 1.2%, the S&P500 went down by 0.5% and the NASDAQ deteriorated by 0.4%. Investors learnt the dynamic of the US retail sales. The result of 3% y/y was a positive surprise. Nevertheless, the number of initial jobless claims stood at 295K vs 271K expected. It is worth paying attention to the hawkish comments of some members of the FOMC as well. They may suggest that the interest rates will be raised at the beginning of the third quarter.

In Poland, the market sentiment was bearish again – the WIG20 declined by 2% and mWIG40 fell by 0.7%. Nonetheless, the sWIG80 managed to grow by 0.6%. Last week data from the Polish economy failed once again – the GDP growth in the first quarter of 2016 stood at 3% y/y vs 3.4% expected. Furthermore, the CPI amounted to -0.4% y/y in April vs -0.2% in March. The highlight of the week was the publication of the Polish credit rating by Moody’s. The agency positively surprised the market. It was expected that Moody’s would have downgraded the credit rating for Poland. Nevertheless, it remained at a high level (A2), whereas its outlook was changed – from stable to negative. The information will be discounted in the coming days. It should be a support for the Polish currency and the WSE.

In the current week it is worth paying attention to the data from the US: the dynamic of the industrial production, the CPI, the Philadelphia Fed index and the leading indicator index. Investors will also learn data on inflation in the Eurozone. In Poland, there will be publications of data on the retail sales, the industrial production and the PPI. In addition, the coming days will bring the peak of the earnings season. On Monday, more than 100 companies listed on the WSE will present the financial results for the first quarter of 2016.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq.

It was the third consecutive week in which the WIG20 was dominated by bears. Monday brought the most severe declines during the whole week. Subsequently, the WIG20 stabilized. As a result, the index of the largest companies ended last week at 1,815 pts.. The level of volumes was low again. The RSI oscillator approached the level of 30 pts. and it may indicate a buy signal soon. On the other hand, a breakthrough of the support of 1,826 pts. (50% Fibonacci retracement) could have been a strong sell signal. Moreover, moving averages definitely indicated a downward trend. After a possible correction, the WIG20 may be dominated by bears once again. The psychological support stands at 1,800 pts.

Graph 2: Wirtualna daily. Source: Stooq.

This time it is worth paying attention to the Wirtualna Polska. During the whole week, its share price rose by 9.3%. When it seemed that an upward trend was coming to the end, quite good financial results of the company and a new recommendation to buy were presented. As a result, the share price reached a historical peak of PLN 48. The RSI oscillator remained neutral, while the MACD oscillator indicated a buy signal. Thus, after any correction, the reversion to the further increases will not be a surprise.

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

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