Summary

Last week on global stock exchanges was dominated by bulls. All because of expected Thursday's ECB decision to introduce anticipated asset purchase program. Increased appetite for growth was connected, for example, with Wednesday’s leaks about a possible QE value of up to 50 bn EUR a month until December 2016. The effect of exceeding those expectations has not been difficult to predict. Mario Draghi's announcement of 60 bn EUR purchases a month until September 2016 (the value of the program amount to 1,1 tn EUR) has quickly resulted in tremendous volatility. Somewhat less attention has been paid to the details that may limit the QE effectiveness, such as purchasing according to the capital key with continuation even when bond yield will be negative and smaller scale than even the third phase of the QE program in United States. The ECB President has pointed out the ability to increase the amount of funds in case of difficulty in achieving primary goal - an adequate level of CPI inflation. In Poland, data on industrial production has surprised very positively. The gauge of economic activity of enterprises in December accelerated by 8.4% y/y.

A result of numerous factors affecting the growth is profitable balance of largest stock exchanges. Among the increases on main exchanges, the French CAC40 excelled, gaining 6%. Both the DAX and the S&P500 have also finished week successfully, growing 4.8% and 1.6% respectively. Indices in Warsaw have abreacted recent declines partially. The WIG20 and the WIG30 strengthened by 3% and the sWIG80 gained 1.2%. Medium-sized companies from the mWIG40 with 2.9% growth performed as positively as blue chips. Generally looking at the week, it is hard to avoid an impression that without clear positive signals on Wednesday and Thursday, the indices would not find the strength to break the next resistances.

This week, the attention of investors will be particularly concentrated on Wednesday’s FOMC statement concerning interest rates. Perhaps we will witness more dovish tone, but nevertheless we have to wait until the crucial meeting on March 17-18. Prior to this announcement, European exchanges will react to moods from Greece, where left-wing Syriza won Sunday's elections. It is hard to predict significant increase in volatility because of this fact. Exchanges have gradually taken this information into account and the way to leave the Eurozone by the Greeks is quite distant anyway. On Tuesday, important information for the US market will be an announcement of new home sales. In recent months, forecasts were higher than real data. At the end of the week we will look at another gauges from US - preliminary GDP deflator, hypothetical GDP changes next year and the Chicago PMI index.

Technical analysis

Graph 1. WIG20 daily. Source: Stooq

After the problems that arose from the decision of the SNB last week, the index finally moved north. Bullish scenario has been executed since Wednesday. The WIG20 has strongly broken significant resistance level of 2300 points, approaching even more important barrier at 2350 points. Another objective after breaking this level would be a short-term downtrend line near 2400 points, which effective testing would mean move to the level of 2475 points. Stopping at the resistance of 2350 points would indicate a re-fight with the August’s lows near 2300 points.

Graph 2. KGHM daily. Source: Stooq

Copper giant performance largely depend on red raw material quotations, as the shareholders of KGHM painfully experienced in recent weeks. The company, along with the annual 22% decline in metal prices, lowered its share price from 122.5 PLN to even 99.7 PLN. Only last week brought a significant rebound. Thursday's battle for closing the gap with a small upper shadow on a fairly large volume ended with relative success. Staying above this gap on Friday allow bulls to attack the important resistance at the level of 114 PLN. Return below the gap will negate the growth scenario, causing test of support levels close to 105-105.5 PLN.

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

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