Summary

It was another unsuccessful week for the stock market investors. Uncertainty over Chinese and global economies still affected global markets. Window dressing at end of the month and the quarter helped prop up the Warsaw Stock Exchange but only for one day. Within the last three months the WIG fell by 6.6%. It means that the quarter ended last Wednesday was the worst one since 2011. Warsaw's blue-chip index performed very poorly. The WIG20 saw as much as 10.8% quarterly fall. What is worse, last week the index was at the lowest levels since 2009. In the week ending 2nd October the WIG20 fell 2.6%, the mWIG40 lost 0.8%, while the sWIG80 decreased by 0.1%. In that case the WSE's broad market index WIG was down 1.3%. The manufacturing PMI was weaker than expectations and lower than the August reading.

The situation in Europe was not comforting as well. The macroeconomic data published last week turned out to be poor. The HICP inflation for Germany and the euro zone was weaker than expected. The euro zone services PMI was in line with expectations, but the German services PMI was slightly weaker than expected. In the week ended 2nd October the DAX lost 1.4%, the CAC40 went down by 1.2%, while British FTSE250 fell 0.2%.

China’s economic data did not help the global financial markets as well. The Caixin China manufacturing PMI declined to the lowest level since 2009. When it comes to the U.S. economy, the Conference Board Consumer Confidence Index and the services PMI beat forecasts. In contrast, the ISM services index and the Chicago PMI were weaker than economists' expectations. However, the U.S. labour market data was the most important in the past week. Wednesday's ADP report estimated that the U.S. private sector added 200,000 new jobs in September vs. 190,000 exp. The positive outcome has created expectations about Friday's Non-Farm Payroll data. However, the payroll figures disappointed. The U.S. economy added 142,000 jobs in September vs. 200,000 exp., while the private sector created 118,000 jobs vs. 190,000 exp. In addition, August nonfarm payrolls have been revised downwards. Despite the weak data, Friday’s session on the U.S. stock markets was quite successful and the major indices made up for some losses from the beginning of the week. In the week ended 2nd October the S&P500 lost 0.4%, the NASDAQ fell by 3.5%, while the DJIA went down by 0.3%.
This week it is worth paying attention to the final services PMI and ISM indices. On Tuesday, the MPC takes a decision concerning interest rates in Poland. On the same day in the evening Mario Draghi gives a speech. On Thursday, the Fed will publish minutes from its last meeting. Markets in China remain closed until Wednesday for National Day holidays.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

The WIG20 declined for the third consecutive week. On Tuesday, the index was at levels unseen since 2009. Warsaw's blue-chip index was being more and more pressed to the very important support at around 2,018. If the WIG20 breaks below the support line and below psychological barrier of 2,000 points, investors should be prepared for further declines. Bulls may look for a double-bottom pattern (the low from September and the last week low), but it will be extremely difficult to form, given the current unfavorable aura.

Graph 2. Eurocash daily. Source: Stooq

Last week Eurocash was the best-performing stocks on the WIG20. Within the last 5 sessions the price increased by 5.2%, reaching its highest level since January 2014. In July Eurocash broke out of the long-term downward trend. In September, the price unsuccessfully tried to break through the resistance at the local maximum from 3rd August. Last week, the bulls once again carried out the attack and this time they managed to break above the resistance at around PLN 44.00. Now, the price may reach even PLN 46,98 where the next major resistance is found. The 9-session RSI oscillator showed a divergence, which may forerun a reversal of the upward trend.

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

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