Summary

Getting closer to autumn electionsmeans , moreideas and promises offered by polititians. They often concern important sectors of the economy, and indeed capital market itself. As a result, politicians often set trends on the WSE. Last week was an example of this. It had already begun a week earlier, with an information from the government regarding possible reduction of the tax on extraction of certain minerals. On Monday, the opposition announced that they would submit a bill exempting companies from the tax. After this information the KGHM shares gained strongly. Within just 2 sessions the price rose by more than 11%. One of the opposition party members announced that it is unlikely that the financial institution tax will be implement in 2016, but later on. The banking sector was the beneficiary of the announcement. Due to the politicians the sector did not enjoy popularity among investors until now. It is possible that in the near future there will be more similar situations. When it comes to the main indices of the Warsaw Stock Exchange, during whole week the WIG20 gained 1.8%, the mWIG40 grew by 2.1% and the sWIG80 rose 0.6%. In comparison to major European stock exchanges the WSE performed pretty well. The DAX ended last week 0.3% in red, the FTSE250 rose by 1%, and the French CAC40 grew by 0.5%.

Better than expected reading of the German institute Ifo index and the initial value of services PMI in the US, which was subtly better than consensus, were published last week. The preliminary reading of the US GDP annual growth rate in the second quarter was slightly weaker than expected. It amounted to 2.3% (forecast 2.6%). In addition, the first-quarter’s reading was revised up from a previously reported -0.2% to 0.6%. After last week's meeting, the FOMC left interest rates unchanged in the US. Of course, it was not a surprise. In the announcement after the meeting we did not get any specifics on possible interest rate hikes in the near future.

Major US stock indices ended last week in positive territory. The S&P500 gained 1.2%, the NASDAQ rose 0.8% and the DJIA ended the week 0.7% above the closing line. Unfortunately, uncertain situation in the Chinese stock market returned. Despite the efforts of the authorities in the past week strong declines recurred. The Shanghai Stock Exchange Composite Index lost as much as 10%.

Manufacturing and services PMI indices for major European economies and the US economy will be the most important releases this week. The ISM indices will be also worthwhile. Nevertheless, the ADP Employment Report released on Wednesday and Friday’s nonfarm payroll monthly release will be very important data as well. Their overtone has a large influence on the Fed decisions concerning interest rates. On Monday morning we will know the value of Polish manufacturing PMI index.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

Last week due to the politicians’ announcements the WIG20 managed to make up for some declines from the previous week. Although the beginning of the week did not indicate it. The course brushed the support level at 2,166 points, which was hole of 5th September 2013. On Monday, the price temporarily descended below the support line. Next days have brought some growths, but the index had problems with breaking through resistance level at about 2,225 points (hole from 16th January). The WIG20 ended the week at 2,227 points., so definitively overcome of the resistance is not at all certain yet. After eventual bulls victory the resistance level at around 2,300 points will be the next target.

Graph 2. Rainbow Tours daily. Source: Stooq

Last week was very successful for shareholders of the Rainbow Tours company. From the beginning of the week the shares gained in value 9.7%. It was the second week of solid growths. After an upward break of nearly 3-months descending channel the course was continuing an upward movement. The share price neared important resistance level, which is historic peak from 5th May at 26.96 PLN. Now, the price is 26.10 PLN. The 9-session RSI oscillator indicates an overbought. Nevertheless, if we look at the historical price behaviour whereas the oscillator was at similar levels, we can see that even then increases were often continued.

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

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