Summary

Last week market sentiment was determined by the information from the negotiations between the Greek government and its creditors. Monday brought a bit of optimistic news. Belief in achieving consensus reached most of the indices a few percent above closing line. During the rest of the week, investors were trying to maintain gained profits and waiting for a solution to the Greek case. Depending on the tone of the incoming information the main European stock indices were moving up and down. However, it was only a short term fluctuation. Finally, the main Western European markets ended the week in positive territory. During the whole week the FTSE250 index grew by 0.7%, the DAX gained 4.1% and the French CAC40 recorded largest increase of 5.1%. Macroeconomic data publications, which generally were positive, were on the second place. The June PMI index readings for services and industry in Germany, France and throughout the euro area in each case was higher than the market consensus and were above the threshold of 50 points indicating that the economy in Europe is accelerating. On the other hand, the publication of the Ifo business climate index disappointed investors, because it fell for a second consecutive month and was lower than the market expectations. The behaviour of big and medium companies on the Warsaw Stock Exchange was similar to the prevailing mood in Europe. After the Monday's rise, the next few days were a typical waiting period. The WIG20 rose by 1.5% and the mWIG40 gained 1.8%. The small companies index was the weakest - sWIG80 lost 0.8% during whole week. Markets in the United States were calmer.

Investors ended the week in a rather quiet mood, waiting for an agreement on the Greek issue. However, here we had a lot of surprise and disappointment. Greece broke off the negotiations after the Troika did not agree to deferring repayment of debts to the IMF and the Greek government wants the public to decide about the austerity programme. An express referendum will be held on 5th of July, but the payment deadline is 30th of June. Arguably this week, banks and the stock exchange in Greece won’t be open. Capital control was introduced in order to protect banks. The EBC still provides liquidity to Greek banks, but at the same level. Surely, red color will dominate in the beginning of the week, but we still don’t know whether the case will be solved. Anyway, panic similar to Lehman Brothers colapse is not expected.

In Europe, PMI indices for industry and services will be the most important macroeconomic data releases. Polish industry PMI index will also be released. The data of the week would be an American labour market data–unemployment rate and change in nonfarm payrolls.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

For the first time since five weeks the WIG20 index has ended the week on positive territory gaining 1.5%. There was a bounce off the strong support located at about 2300 points. During the Thursday session, the index value was approaching the resistance at 2376 points, but eventually turned south. Now, the blue-chip index is at 2334 points and only movement over next resistance at 2376 points can create hope for improvement in sentiment. But still, it will not be a strong buy signal, because only a movement above the uptrend line located a bit higher can result in stronger movement to the north.

Graph 2. Duon daily. Source: Stooq

Last week, the Duon Group shares noted one of the best results on the WSE. On Wednesday the stock price broke upward out of the triangle formation opening with a breakaway gap. Declining volume and its growth accompanying the break were the confirmation. It was a reaction to an increase in the company’s financial forecasts for this year. Since the beginning of the week the price increased by 11.2%. The company shares have been in an upward trend since September 2009. Closes resistance levels from the 2009 and 2008 is located at the level of 3.77 PLN and 3.94 PLN are. Now, the price is PLN 2.98.

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

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