Summary

Undoubtedly, the FOMC meeting was the highlight of the past week’s economic calendar. The Federal Reserve returned to work after a holiday break and aroused a lot of market emotions. The Fed announced a beginning of the balance sheet reduction process. Moreover, the bank planned to raise interest rates one more time this year and next three times in 2018. A few months ago this had been a basis scenario, whereas a series of mixed data from the US economy and the devastating hurricanes made investors skeptical about the further pace of Fed’s monetary tightening. Thus dollar appreciated against euro noticeable last week. The message of the Federal Reserve adversely affected the stock market sentiment in the second half of the past week. During the last five trading days, the DJI increased by 0.4%, the S&P500 soared by 0.1% and the NASDAQ fell by 0.3%. In Europe, the market was quite more bullish – the French CAC40 rose by 1.3%, the British FTSE250 grew by 0.7% and the German DAX went up by 0.6%. It is worth paying attention to the initial readings of the PMIs for the Euroland and the US. While in the first case these definitely exceeded market projections, in the second the manufacturing PMI was in line with the market consensus and the services PMI was significantly lower than expectations. The data from the US quite failed, however, the American economy still has been on the path of growth. It should be added that there were Bundestag elections last weekend. The results of the elections did not bring a surprise – Angela Merkel’s party will retain power, so the impact of this event on the financial markets should not be significant.

This time in Poland, the small and medium-sized companies outperformed blue chips. During the whole past week, the WIG20 fell by 0.7%, while the mWIG40 rose by 0.9% and the sWIG80 declined by 0.05%. The latest macroeconomic data releases was in the spotlight. The readings confirmed a very good condition of the Polish economy. In August, the wage growth rate (7.6% y/y), the dynamics of the manufacturing production (8.8% y/y) and the retail sales (7.6% y/y) were significantly higher than projections. In addition, the unemployment rate dropped from 7.1% to 7%. It is worth paying attention to the minutes from the last meeting of the MPC as well. The document confirmed that the council was clearly divided on the further shape of the monetary policy. However, the monetary policy should remain unchanged in the near future.

This week, investors will focus on public appearances of Mario Draghi and Janet Yellen. Furthermore, special attention should be paid to the latest macroeconomic data readings. Investors will learn the German Ifo index, the confidence indices for the Euroland, the dynamic of the American durable goods orders and the final release of the annualized GDP growth rate for the second quarter from the US.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

After two weeks of consolidation the index of the largest Polish companies chose the southern direction. As a result, the WIG20 ended the last week at 2,480 pts.. Nevertheless, a line of the long-term upward trend was not broken. Moreover, the falls were accompanied by the low volume of trade – it was quite good news for bulls. The upward trend still seems to be strong. A breakthrough of the support level at 2,300 pts. should be considered as a potential sell signal. On the other hand, the nearest resistance level stands at 2,555 pts.. It should be also noted that in the case of further growths a psychological level of 2600 pts. seems to be a target level. This was too challenging barrier for the market in years 2012 – 2015.

Graph 2: Grupa Azoty daily. Source: Stooq

This time we chose Grupa Azoty as a company of the week. During the last five trading days, its stock price grew by 11.1%, breaking the resistance level at PLN 74 – the upper limit of a long-term consolidation. The growths had been signaled by the MACD oscillator. The strength of demand was confirmed by the increased volume of trade as well. A breakthrough of the resistance level at PLN 76 should be considered as a buy signal. However, a potential test of this barrier may be preceded by a correction which has been signaled by the overbought RSI oscillator.

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

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