Summary

Last week has provided a great deal of emotions and substantial volatility. This was influenced by a number of macroeconomic data releases as well as the words of the head of the ECB. At the beginning it seemed that investors’ moods could be affected by poor data from Japan, where GDP fell by 1.6%. This was interpreted as ‘bad news is a good news’ as it calls for more quantitative loosening by the BoJ. Serious threat could have been disappointing data from the Eurozone - PMI from France and Germany was surprisingly poor. Especially the industrial PMI from Germany returned to 50 points. Because the index is in decline it is highly probable that the October increase was incidental. Despite the economic problems, German DAX reacted moderately, and ended Thursday's session positive. On Friday morning the optimism reigned after the words of Mario Draghi, who diagnosed a bad situation in the euro area and assured of readiness for further action. Eurodollar strongly weakened, Draghi’s words had positive effect on the stock market. As a result the DAX gained throughout the week 5.2% and the CAC40 3.4%. In the US the upward trend continued, despite mixed economic data. The S&P 500 broke a new record (2071.46 points), and the week ended an increase of 1.2%.

Indices in Warsaw did not perform well. Large companies from the WIG20 ended the week at zero. The WIG250 and the WIG50 indices noted small declines. It can be argued that easing by the ECB more concerned the euro area markets, but even against the background of the region (Hungary, especially the Czech Republic), the result is disappointing. Industrial production data was neutral. The MPC members, Belka and J. Osiatyński sounded dovish. Nevertheless, the market sees less chance of a rate cut during December meeting. This, however, does not explain the weakness of polish indices. We begin to worry that Polish economy might enter into another period of downward trend due to the cautious approach to the Polish market and concerns about the burden on poor trade with Russia on the results of the companies in the fourth quarter. On the other hand, December is usually good for equity markets.

This week we will know the Polish retail sales in October and the final reading of GDP for the third quarter. The most important will be global readings. As early as Monday morning on the first plan comes out the German Ifo index, next will be annual HICP inflation in Germany and the euro zone. Next would be a series of data from the USA, like durable goods orders and Chicago PMI index.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

The WIG20 ended last week at the opening level. No change from week to week does not mean that nothing has happened in the last 5 trading days. The initial optimism in the middle of the week turned into pessimism and only thanks to a successful session on Friday index defended support of 2400 points. Turnover was stable and not substantial. The defence of aforementioned support gives a chance to test last week's heights of 2436 points. Breaking this level will open the way to the 2476 test points. The negation of this scenario will be closing session at less than 2400 points.

Graph 2. Lotos daily. Source: Stooq

This time we chose Lotos as the Company of the week, which until recently was clearly "looking for the bottom". After cutting the rights the optimists began to prevail. Last week oil company noted a very large, 11.5% increase in the and is now approaching a resistance at 28 PLN. Importantly, the gains are supported by volumes, were a significant increase was noted. Maybe that was a turning point, although still a large gap from the session of 13 August is to be cover. Thus, the area between 28 and 32 PLN will be crucial even for a long-term perspective on the company. In a short perspective you can expect more fighting between demand and supply. 

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

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