Summary

Last week was very rich in numerous macroeconomic data readings, especially from the US. It was expected that the data could have helped to answer the question whether the recent hawkish comments of Fed representatives would be reflected in the interest rates rise. The latest economic data readings failed, whereas the market believed that the FOMC would decide to tighten monetary policy in the coming months. On the one hand, the reading of the Conference Board index surprised positively (101.1 pts. vs 96.9 pts. expected), while on the other the publication of the Chicago PMI disappointed investors (51.5 pts. vs 54 pts. expected). Nonetheless, the highlight of the week was the release of data from the American labor market. They did not meet the expectations, whereas confirmed really good state of the labor market. The reading of the nonfarm payrolls failed. It stood at 151K vs 180K expected. Despite these facts, the data turned out to be a support for dollar and the American stock indices. During the whole week, the NASDAQ rose by 0.6%, while the DJI and the S&P500 went up by 0.5%. The market sentiment was bullish in Europe as well. French CAC40 took off by 2.3%, German DAX soared by 0.9% and British FTSE250 increased by 0.5%. It is also worth paying special attention to the latest data from the Eurozone. The unemployment rate amounted to 10.1% in July vs 10% expected. The manufacturing PMI stood at 51.7 pts. against 51.8 pts. expected.

The past week was not successful for the investors at Ksiazeca – the WIG20 declined by 0.5% and the sWIG80 went down by 0.4%. Unlike to them, the mWIG40 rose by 0.6%. Investors learnt the GDP growth for the second quarter of 2016. It stood at 3.1% y/y. The result confirmed that in the first half of 2016 the Polish economy grew slower than expected. Meanwhile, the manufacturing PMI amounted to 51.5 pts. in August against 50.3 pts. in July. On Friday, the earnings season of the companies listed on the WSE came to the end. It is worth paying special attention to Ciech. The company reported a net profit which exceeded analysts’ projections. Moreover, the financial performance of Forte and PHN did not fail as well. In contrast, the financial results of Kruk and LPP disappointed investors.

In the current week investors will focus on central banks. The Governing Council of the ECB and the MPC will make decisions on the interest rates. The Fed will publish the Beige Book. In addition, there will be plenty of macroeconomic data readings, this time especially from the Eurozone e.g. the services PMI, the dynamic of the retail sales and the GDP growth rate for the second quarter of 2016. Furthermore, Moody’s will release a review of the Polish credit ratings.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

The last days of August brought some growths of the WIG20, whereas the beginning of the September was dominated by bears. As a result, the index of the largest Polish companies ended last week at 1,767 pts.. What is more, the index was below the line of the long – term downward trend. The RSI oscillator remained neutral. Nevertheless, the quicker moving average crossed below the slower moving average. In the coming days the cross of death pattern can be confirmed – a strong sell signal. Thus, the probability of further declines towards the level of 1,700 pts. seems to be very high.

Graph 2: JSW daily. Source: Stooq.

We chose JSW as a company of the week. During the whole week, the share price of the company increased by 32%. The bullish market sentiment was the result of the new agreement between the company and its bondholders. Moreover, it should be reiterated that the current situation in the coal market and the restructuring activities helped the share price to grow. Lately, the course was in an upward trend. However, the RSI oscillator indicated overbought. What is more, it formed a negative divergence, so in the near future a correction can be expected.

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

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