Summary

After significant domination of bulls on Wall Street in February, March is characterized by vast majority of the supply side. The S&P500’s declines last week were connected with the factor that greatly strengthened the US currency - expected hawkish FOMC interest rates statement on Wednesday. The prospect of removal the word 'patient' from the statement and possibility to interest rates’ increase already in June caused increased risk aversion and some investors sold their shares. Indexes also were not supported by much weaker than expected data on US retail sales. Reading amounted to only -0.6% m/m in relation to projected 0.3% m/m. The Warsaw Stock Exchange, similarly to Turkish and Hungarian exchanges, is still continuing negative trend in relation to the developed countries’ markets. When emerging markets’ exchanges, at best, are moving in sideways trends, the DAX and the CAC40 reaches historical highs.

Warsaw blue-chip index recorded a decline of 1.8% last week. Mediocres from the mWIG40 ended the week at the same level which was up-to-date seven days ago and small-sized companies declined symbolically. The German Dax reached new peaks and rose by 3% during the week. Thus, we have witnessed the ninth week with bulls’ domination. The CAC40 performed slightly less convincing with 0.9% increase. The same scale of decline recorded the S&P500, which is still under seller’s pressure.

Wednesday's FOMC interest rates statement will be interesting for markets current week. Market consensus expects hawkish statement and removal of the word 'patient', which is clearly proven by Wall Street’s declines lasting from 3 March. Monday will bring us data on industrial production in the USA and domestic inflation details. On Tuesday, we will look at the index of new homes construction and the average annual growth rate of gross wages and employment in Poland. Wednesday will be marked by already mentioned FOMC statement, and Polish investors will also look at the data on industrial production. On Thursday, investors will be focused on Swiss franc and the SNB decision on interest rates. Another consecutive interest rate cut is expected, not only by indebted in franc, and would cause the Swiss currency depreciation. At the end of the week we will look at less important data from the US - the Conference Board index, current account balance and number of applications for unemployment benefit.

Technical analysis

Graph 1. WIG20 daily. Source: Stooq

Bears domination was part of the negative technical scenario from earlier days last week. The retreat from downward trend line visible on the chart was continued current week. The strength of the downward trend was significant, because support on 2350 points was easily broken. Market fights to defend 2,300 points currently, just as it had place in January and August previous year. Breaking this level would result in fighting to keep a nearby support at 2,280 points. Movement to the north would result in another fight with the downtrend trend line.

Graph 2. Getin Noble daily. Source: Stooq

Getin Holding quotations outstanded positively, gaining more than 10% during last week. From a technical point of view, it was important to break the resistance at 2.22. Thus, the route to the level of 2.54 is opened and according to the current level of 2.28 it would result in possibility of another 10% increase. Potential adjustment would reach the level of around 2.13, but would require a break of the recently defeated resistance from the top.

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

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