Summary

Due to the significant political risk, investors returned from Easter in mixed moods. The American stock market indices liked the green color last week – the NASDAQ increased by 1.8%, the S&P500 soared by 0.8% and the DJI rose by 0.5%. Certainly, this was an effect of the solid condition of the US economy. Moreover, the geopolitical situation in North Korea remained stable, although still tense. However, due to the political risk in France, the European stock market sentiment was quite bearish. Recent pre – election polls showed that the fight for the French presidential chair will be extremely fierce. In fact, there were only four major candidates. Each of them could count on about 20% of support. It generated a risk that Mélenchon and Le Pen would be in the second round of elections – this would be the worst possible scenario for the market, because the French would have to choose eurosceptic Le Pen or Mélenchon - the man with the communist views. As a result, during the whole past week, British FTSE250 fell by 0.9%, German DAX declined by 0.5% and French CAC40 deteriorated by 0.2%. Nonetheless, investors should be calm. Exit polls have shown that Le Pen and Macron will probably be in the second round of the elections. What is more, the latest surveys have shown that the favorite is only one – Macron. It has been a very good information for the market. It should be also noted that the political risk will remain meaningful in the coming months of this year. Last week, Theresa May announced an early elections in the Great Britain (on the 8th of June). In addition, the Germans will choose new authorities (on the 24th of September) and perhaps the Italians as well.

The market sentiment on the WSE was also quite mixed. During the whole week, the WIG20 grew by 1.2%, the mWIG40 went up by 0.6%, while the sWIG80 decreased by 0.4%. The market focused on the latest macroeconomic data which turned out to be very robust. The dynamics of the retail sales and the manufacturing production stood at 9.7% y/y and 11.1% y/y vs 8.2% and 7.15% projected. Furthermore, investors learnt the minutes from the last meeting of the MPC. The document did not bring anything new, so it did not arouse any market emotions. It is worth noting that Dino Polska launched its IPO last week. It was the biggest stock market debut on the WSE for four years.

This week, attention should be paid to the latest macroeconomic data releases, for instance, to the German Ifo index and the American GDP growth rate in the first quarter of 2017. Moreover, central banks will be in the spotlight, especially the ECB and the BoJ. They will make decisions on the interest rates and other aspects of the monetary policy. In Poland, investors will focus on the numerous financial statements which will be presented by the companies listed on the WSE.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

Last week’s growths caused that the blue – chip index reached the resistance level at 2,300 pts.. In fact, the barrier was the upper limit of a current sideways trend. Nevertheless, Friday’s trading session was dominated by bears, so the test of the barrier ended in failure. Thus, the WIG20 stood at 2,264 pts. at the close of the week. It should be also reiterated that the volume of trade remained at a high level. Therefore, there is a high probability that the market will continue the horizontal trend, so further movements towards the support level at 2,165 pts.. should not be ruled out in the near future.

Graph 2: Sygnity daily. Source: Stooq

This time Sygnity deserved the company of the week name. During the whole week, the share price of the IT company rose by 14%. Lately, the stock price was in a phase of correction, however, this seems to be completed now. It is worth emphasizing that the last week’s increases had been signaled by some technical oscillators. Moreover, the volume of trade went up – bulls probably returned. The nearest resistance level stands at PLN 6.5. The breakthrough of this barrier will open the way for further movements towards the psychological level at PLN 7.0.

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