Summary

Last week there wasn’t much data releases that would drive the markets. Concerns about escalation of the conflict in Ukraine are again worrying investors. At the meeting of the G20 leaders Russian President Putin left the summit earlier than expected. He denies the presence of Russian troops in Ukraine. There are no high hopes to lift sanctions that are harmful not only to Russia but Europe as well. Even looking at the domestic market - many companies are showing weaker results either by the slowdown in Germany, weak Russian market or problems related to currency risk. Of the major European exchanges, the FTSE was the strongest, growing by 1.2%. It is worth paying attention to the latest BoE inflation report, where the expected date of the first rate increase has been moved from the first quarter of 2015 to October 2015. The CAC40 rose by 0.3% and the DAX lost 0.4%. Once again, records were recorded in the US (the S&P 500 was up by 0.4%), where generally good performance of companies and strong economy is driving indices higher. 

It is worth looking at Poland for a moment, where two important figures were released last week. Deflation of 0.6% is much more than the expected 0.4%, but it does not imply December rate cut. The MPC strongly emphasizes that economic growth close to 3% is a sufficient level to be considered for optimal booming economy. And it is a preliminary reading of GDP growth for the third quarter that turned out to be great - an increase of 3.3% instead of expected 2.9%. We do not know yet the structure of this growth, but a MPC’s dovish wing comment (A. Zielinska-Głębocka) indicate that the Council may follow the ‘wait and see’ strategy. The WSE did not respond to GDP numbers directly, but on Friday blue chip companies were back in the game. As a result, balance of the week for the WIG20 and the WIG30 falls to zero, but for medium and small companies it wasn’t that good. The WIG50 lost 1.2% and the WIG250 went down by 0.6%. A furniture manufacturer Forte did disappoint with the results. Investors accustomed to double-digit growth rates in revenues and net profit, this time, first time in many quarters were let down. Accountant profit from the so-called "Occasional purchase of the mine" demonstrated by JSW in the third quarter was quickly interpreted properly by investors, resulting in JSW losing 5.8%.

This week is quite rich in macro data, the most important being the US industrial production, PMI for the services sector and industry, and the minutes of the FOMC meeting. From Poland, October industrial production will be crucial. Investors should expect greater volatility of stock indices this week.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

Thanks to a successful second part of the Friday session, the WIG20 managed to stay above the level of 2400 points. Increase of more than 1% on Friday managed to cover earlier declines, resulting in the WIG20 ending week flat. From the technical analysis perspective is not comfortable. After three recent peaks, a short-term downtrend line can be drawn, which is now the next resistance for the index is currently located at 2450 points. Overcoming this level may open its way to defeat the November 2476 peak and further to 2560 points. At the moment, there is still considerable risk of descending below 2400 points.

Graph 2. Arctic Paper daily. Source: Stooq

At the company of the week we chose Arctic Paper, mainly due to its Friday performance (increase of 9.3%). The company reported good results for the third quarter., which investors rewarded with increased interest. Achieving the level of PLN 4.13 means that the company is at its highest since June 2013. The upward trend is entering a new phase. Confirmed volume breakout from a short consolidation paves the way for a test of resistance at 4.83 PLN, which are consolidation dips from 2012 and 2013. We see the level of short-term growth potential of the company, and the negation of a buy signal would be a cover of gap mentioned earlier or fall below 3.78 PLN.

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

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