Summary

After a period of smooth trade and low volatility in the global financial markets, politics again aroused a lot of emotions. Donald Trump who reportedly abused his power and disclosed state secrets was in the spotlight. The information not only had a negative impact on the image of the US president, but it may also be the source of subsequent disputes and divisions in Congress. This has been a significant risk factor for the market, as the issue of the Donald Trump’s economic reforms implementation has seemed increasingly questionable. Therefore, it was not a surprise that major global stock market indices ended the last week in negative territory. During the whole week, the NASDAQ fell by 0.6%, the DJI and the S&P500 went down by 0.4%. In Europe, French CAC40 declined by 1.5%, German DAX shrank by 1%, while British FTSE250 increased by 0.3%. Attention should be also paid to the minutes from the last meeting of the ECB Governing Council. According to the document, the council was clearly divided on the issue of the monetary policy normalization. However, it meant there was an increasing number of hawks in this body. In addition, investors learnt some important macroeconomic data last week. The condition of the Euroland’s economy has been recovering and the GDP growth rate in the first quarter of 2017 stood at 1.7% y/y. In China, the dynamics of the retails sales and the manufacturing production amounted to 10.7% y/y and 6.5% y/y vs 10.6% and 7.1% expected.

The Polish stock market was also dominated by bears last week. During the last five trading days, the WIG20 and the mWIG40 declined by 1.7%, while the sWIG80 went down by 0.2%. The latest macroeconomic data releases were the highlights of the past week. The GDP growth rate in the first quarter of 2017 stood at 4% y/y vs 3.9% projected. Over the past few years, this was undoubtedly a very good result. On the other hand, the dynamics of the retail sales and the manufacturing production amounted to 8.1% y/y and -0.6% y/y vs 8.9% and 2.4% expected. The readings were quite disappointing, albeit resulted by the seasonal factors. Last week, there was the MPC meeting as well. The council did not make any changes in the monetary policy. Moreover, Adam Glapinski emphasized that the policy of the interest rates stabilization would be continued in 2017 and probably in 2018.

This week, it is worth paying attention to the publications of the preliminary PMIs for the US and the Euroland. Furthermore, investors will learn the minutes from the last meetings of the FOMC and the MPC. In Poland, there will be a release of the unemployment rate as well. Nevertheless, investors will focus on numerous presentations of financial statements of companies listed on the WSE.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

The dominance of bears was quite explicit, although bulls was trying to take the initiative in the second part of the week. As a result, the WIG20 ended Friday’s trading session at 2,328 pts.. Moreover, the market tested the psychological barrier of 2,300 pts.. The attempt ended in failure. Thus, there will be a chance to confirm the earlier breaking through of a consolidation – a potential buy signal. On the other hand, it should be noted that the volume of trade increased when the index was falling. The battle for a continuation of the bull market will be going on, whereas its outcome does not seem to be settled.

Graph 2: Wirtualna Polska daily. Source: Stooq

This time the share price of Wirtualna Polska deserved the honorable mention. During the whole past week, it grew by 6.5%. The company published solid financial results for the first quarter of 2017, albeit burdened by high capital expenditures. After all, the market expected further improvement of the profitability in the next periods, so the stock price rebounded from the support level at PLN 48 and remained in a consolidation. It should be reiterated that the growths had been signaled by some technical indicators, for instance, by the RSI and the MACD oscillators. The probability of further movements towards north seems to be high. The nearest resistance level stands at PLN 54.

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

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