Summary

After a solid Monday and continuation of last week increases, the WSE was dominated by bears. Blue chips had been defending against declines until Wednesday. Blue chips index’s problems were connected with banks again. Declines in the most important sector were triggered by Financial Supervision Authority statement about capital back tax for banks granting foreign currency loans. The supply side in the form of index’ investors prevailed among mid-sized companies too. Changes related to the indices rebounded on the mWIG40, which recorded the greatest losses on the Warsaw Stock Exchange last week. The situation overseas was similar. After the initial increases, the S&P500 returned to the level of 2050 points. The German DAX was performing slightly better. In this case, however, this was a result of good PMI indices for industry and services. Despite this, the German stock market index, as well as the French CAC40, ended the week with losses.

The Warsaw blue chips ultimately lost almost half of what it was able to work out the previous week. The WIG20 ended the week with a 1.4% loss. Mediocres fell worse, falling by 2.5%. Companies from the sWIG80 confirmed the strength comparing to the slightly larger counterparts, losing 1.5%. The German DAX ended the week with identical result as the WIG20. The French CAC40 fell slightly better with 1.1% decline. The worst were overseas indexes. The S&P500 fell by 2.2% during the week.

Data with the greatest influence on exchanges will be announced on Friday. Earlier, it is worth to note the HICP inflation in the Eurozone and durable goods orders in the US. The previous month dynamics of orders was significantly higher than the previous and in line with analysts' forecasts. The market certainly hopes for another strong reading just before a series of labor market data. Wednesday's ADP report will traditionally prelude Friday's payrolls. In contrast to the changes of employment in non-agricultural sector, ADP’s estimates were lower than expected in two previous months. The US non-farm payrolls surprised very positively, exceeding expectations by as much as 55 000. Among the important data, the hourly rate, the length of the working week and the unemployment rate should also be mentioned. The latter remains in a downward trend, reaching record low of 5.5% previous month. In the context of the recent S&P500’s declines, a return to growth would require repeat unexpectedly strong US non-farm payrolls from the previous month.

Technical analysis

Graph 1. WIG20 daily. Source: Stooq

Last week was completely opposite for the previous one for the Warsaw blue chips. Good news for the banking sector have been replaced by the negative, and from a technical point of view, the WIG20 is executing scenario favourable for bears. Rebound from the resistance at 2415 points opens the way to 2300 points. On the way, the bulls will defend the current support at 2375 points and the previously broken downtrend line. Staying above this level will herald continuation of the ongoing trend since mid-January this year.

Graph 2. Voxel daily. Source: Stooq

The Voxel company was one of the leaders of last week's gains. Leader of Polish imaging diagnostics market gained almost 10% during the week, opening the way for a much higher increases. All because of breaking the significant resistance at 11.25 and trading above this level at the end of the week. Continuation of growth will mean fight for the next resistance at 12.50 the next few days. Relatively high volume of candlelight growth is an advantage, which might result in return to the trading level from March 2014.

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

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