Summary

In the market’s opinion, a December interest rates raise by the FOMC is certain. In fact, this attitude is not unfounded – the latest macroeconomic data from the US once again confirmed the strength of the American economy. The readings of the annualized GDP growth (3.2%), the Chicago PMI (57.6 pts.) and the manufacturing PMI (54.1 pts.) turned out to be significantly higher than expected. What is more, data from the American labor market did not fail as well. The non-farm payrolls stood at 178K vs 175K projected and the unemployment rate amounted to 4.6% vs 4.9% expected. After all, the market sentiment was rather bearish in the US – the DJI rose by 0.1%, while the NASDAQ fell by 2.7% and the S&P500 went down by 1%. The European stock indices were also dominated by the red color – German DAX deteriorated by 1.7%, British FTSE250 declined by 1%, and French CAC40 decreased by 0.5%. Last week, there were significant increases in oil prices as well - an international agreement concerning limiting of oil production was signed. Moreover, investors focused on the Italian referendum. According to the first exit polls, proposed reforms were rejected. This means that the Prime Minister Matteo Renzi will step down.

In Poland the market sentiment was rather bearish. During the whole week, the WIG20 fell by 0.7% and the sWIG80 went down by 0.3%. Nonetheless, the mWIG40 rose by 1.1%. Investors learnt the manufacturing PMI. It stood at 51.9 pts. vs 50.8 pts. expected. However, the market tone did not improve. Lately, the releases of the GDP growth rate and the dynamics of the manufacturing production and the retail sales turned out to be extremely disappointing. The highlight of the past week was the publication of the latest Poland’s credit rating by S&P. The agency once again surprised market, whereas this time positively. S&P maintained the current credit rating at “BBB+”, but it changed the outlook from “negative” to “stable”. It should be emphasized that the modification did not affect Polish zloty which remained weak against dollar and euro.

The most important event of the week will be the meeting of the Governing Council of the ECB. Some investors expect that QE will be extended. The decision on the interest rates will be made by the Polish MPC as well. The market does not expect any changes in the monetary policy. In addition, it is worth paying attention to data from the Eurozone e.g. the GDP growth for the third quarter of 2016, the dynamic of the retail sales and the final reading of the services PMI.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

Last Wednesday, a trading session aroused a lot of expectations among many investors at Ksiazeca. That day, the WIG20 increased by more than 1% and once again approached the psychological barrier of 1,800 pts.. What is more, daily volume of trade exceeded one billion zloty – lately, this was a rarity. After all, next days did not bring further growths. The RSI oscillator remained neutral. Thus, the market once again was not able to break the upper limit of the horizontal trend. The blue – chip index ended last week at 1,783 pts. and remained in the consolidation.

Graph 2: Erg daily. Source: Stooq

This time special attention should be paid to ERG. During the whole week, its share price grew by 12.4%. This year has been very auspicious for the shareholders of the company – the share price has been moving in a growth channel since March. Lately, it broke the resistance level at PLN 55. Another barrier stands at PLN 60. The RSI oscillator may soon figure out overbought. Nevertheless, the MACD oscillator indicated a buy signal. This means that after a potential correction a share price will return to the further increases. Furthermore, it will probably reach next local peaks.

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

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