Summary

Last week, there was a continuation of the dispute between Washington and Ankara. Unfortunately, the emerging markets and the stock markets were the biggest victims of the conflict. The rejection of the appeal for the release of the American pastor accused for terrorist activities was the key information of the past week. After that, the US threatened to implement further sanctions on Turkey. So far, the White House imposed on Ankara elevated tariffs on steel and aluminum, and sanctions against Justice Minister Abdulhamit Gul and the head of the Ministry of Internal Affairs, Suleyman Soyl. In response Turkey doubled the duties on some imported goods from the US, including passenger cars, alcohol, tobacco, cosmetics, rice and coal.

The current geopolitical problems have not only covered the events from the American and Turkey economies. There has been considerable exposure of the European banks to the Turkish assets, which values declined remarkable after lira’s depreciation. After the collapse of bridge in Genoa, there appeared some rumors about the terrible condition of the Italian infrastructure and possible expenditure of EUR 80 billion for its modernization. This may violate the EU budgetary principles and intensify the problem of the Italian debt. Due to these fears, the performance of the stock market indices in Milan was the weakest in Europe last week. The FTSE MIB fell by 3.2%. Other European markets were dominated by the red color as well. During the whole past week, the German DAX declined by 1.72% and the French CAC40 dropped by 1.29%. In Poland, the WIG20 went down by 1.31%, the mWIG40 decreased by 0.94% and the sWIG80 deteriorated by 0.15%.

This week, there will be the Muslim Sacrifice Day, so the situation in Turkey may be in the background. On the other hand, the trade war between China and the US will be in the spotlight. In the following days, another portion of the US tariffs will be activated. However, there is again a chance that both sides will start negotiations. There will also be some important macroeconomic data releases this week. Today, there has been a reading of the Polish manufacturing production growth rate. The result at 10.3% y/y exceeded the projection at 9.7% y/y. Nonetheless, the increase in the construction and assembly production was slightly lower than the consensus (18.7% vs 20%). The PPI stood at 3.4% vs 3.55% expected. On Wednesday, there will be presentation of the retail sales growth rate in Poland as well. The projection amounts to 8.4% y/y in July vs 10.3% y/y in June. On Thursday, investors will learn the preliminary PMIs for the largest economies. On Friday, it is worth paying attention to the readings of the inflation in Japan, the GDP growth rate from Germany and the dynamic on the durable goods orders in the US.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

It was another week that the index of the largest Polish companies ended in negative territory. At Friday’s trading session close, the WIG20 stood at 2,217 pts. The volume of trade remained stable and the RSI oscillator was neutral, so this was not a domination of bears. After all, the situation of bulls remained really difficult, especially as the resistance level at 2,330 pts. has not been broken yet. Furthermore, double top pattern was formed, a trend reversal signal. As a result, the medium-term picture seems to resemble a consolidation.

Graph 2: CI Games daily. Source: Stooq

This time we chose CI Games as a company of the week. During the whole past week, the share price of the entity rose by nearly 44%. The increased volume of trade confirmed the strength of bulls as well. Such a strong market reaction was caused by the announcement of the release of the next edition of Sniper Ghost Warriors series. The information was so surprising because the company had wanted to leave large productions and deal with smaller games. Nevertheless, the market reaction was really positive. The share price rebounded from a local low peak and broke the line of a mid-term downward trend. The closest resistance level stands at PLN 2. However, it does not seem the barrier may be broken in the near future. The overbought technical oscillators have signaled a correction, which after such dynamic stock price growths will not be a surprise.

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

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