Summary

The failure of Donald Trump in Congress turned out to be only a short - term bearish incentive. Last week, major global stock market indices returned to the path of growth. During the whole week, the NASDAQ increased by 1.4%, the S&P500 soared by 0.8% and the DJI went up by 0.3%. In Europe, German DAX increased by 2.1%, French CAC40 took off by 2%, while British FTSE250 fell by 0.1%. Nevertheless, political risk remains active, so it may be very important in a broader perspective. Last week, there were a lot of public appearances of the FOMC representatives. Most of them turned out to be hawkish. In addition, investors learnt plenty of macroeconomic data. This confirmed solid condition of the world’s largest economies. In the US, the releases of the Conference Board Index (125.6 pts.) and the Chicago PMI (57.7 pts.) did not fail. Moreover, the annualized GDP growth rate for fourth quarter of 2016 stood at 2.1% vs 2% projected. It is also worth paying attention to the German Ifo index which turned out to be higher than expectations (112.3 pts. vs 111 pts.). There were also some economic data releases from China. The manufacturing PMI amounted to 51.8 pts. and the services PMI stood at 55.1 pts.. The condition of the global economy has been improving and the market sentiment has been bullish. So far, it seems that the policy of Donald Trump remains the only significant risk factor for the financial markets.

Despite the fact that the global market tone was bullish, the Polish stock market indices ended the last week in negative territory. During the whole week, the WIG20 declined by 2.6%, the mWIG40 went down by 1.1%, while the sWIG80 grew by 0.1%. The correction was not a surprise, because the last few months were really successful for the investors at Ksiazeca. This time the Polish economic calendar was not rich. Attention should be paid to the CPI. The index stood at 2% y/y vs 2.2% expected – the increase in inflation slowed down. Meanwhile, the topic of the mining bailout was again in the spotlight – the Polish energy companies signed an investment agreement with PGG. As a result, they will recapitalize the group. Investors focused on Selvita as well. The company signed a global license agreement for a substantial amount of 89.1 million euros. Furthermore, CD Projekt and Amica published their financial statements for 2016. The results were very solid.

The event of the current week will be the meeting of Donald Trump with the President of China. It is also worth paying attention to the latest macroeconomic data, especially to the PMI indices for the Euroland and the US and the American payrolls. In Poland, the MPC will make a decision on the interest rates. The market does not expect any changes.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

Last week, the index of the largest Polish companies was dominated by bears. As a result, the WIG20 ended Friday’s trading session at 2,175 pts. (23.6% Fibonacci retracement). The index broke a very important support level at 2,200 pts. what should have been considered as a sell signal. Thus, the correction, which previously took the form of a consolidation, has been gaining a momentum. There were plenty of indications that in the near future the WIG20 will be moving towards the psychological level of 2,100 pts.. It should be noted that the next Fibonacci retracement level (38.3%) stands at 2,082 pts.

Graph 2: Selvita daily. Source: Stooq

This time Selvita deserved the company of the week name. During the whole week, the share price of this company increased by 20.6%. It should be noted that the stock price has been moving in an upward trend since the beginning of 2016. The last few months brought a consolidation. However, last week’s announcement of a very attractive agreement proved to be a significant incentive to further growths of share price. It reached a peak at PLN 75 and then started a dynamic correction. The nearest resistance level stands at PLN 60, while a potential support level stands at PLN 50.

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

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