Summary

The beginning of June was extremely interesting. Investors learnt a lot of economic data from the Eurozone. In most cases, they did not fail. The consumer indices were higher than market expectations. In April, the unemployment rate stood at 10.2%, while the dynamic of the retail sales amounted to 1.4%. What is more, the values of the manufacturing PMI and services PMI stood at 51.5 pts. and 53.3 pts.. Nonetheless, investors focused on the meeting of the ECB’s Governing Council. As expected, the interest rates remained unchanged. On the other hand, Mario Draghi’s commentary aroused plenty of market emotions. The president of the ECB reiterated that the low level of interest rates was a result of the poor condition of the European economy. The past week did not bring good news from the US. The readings of the Conference Board index and the Chicago PMI index strongly disappointed investors. To add insult to injury, data from the American labor market also failed, especially those related to the payrolls. Nevertheless, the unemployment rate stood at 4.7% in May vs 5% in April. It meant that the US labor market was extremely strong and the potential for further improvement was used up. Investors also learnt some data from China – the manufacturing PMI amounted to 49.2 pts., whereas the services PMI stood at 51.2 pts.. During the whole week, the NASDAQ rose by 0.2%, the DJI declined by 0.4%, while the S&P500 did not report any changes. In Europe, French CAC40 went down by 2.1%, German DAX deteriorated by 1.8% and British FTSE250 fell by 1%.

The Polish stock market ended last week in the red – the WIG20 declined by 2.5%, the mWIG40 decreased by 2.4% and the sWIG80 slipped by 2%. In Poland, there was a final release of the GDP growth for the first quarter of 2016. The result was aligned with the original estimation - it stood at 3% y/y. Furthermore, there was a publication of the manufacturing PMI. The value of the index amounted to 52.1 pts. in May vs 51 pts. in April. Lately, a tense political situation was a burden on the WSE. Nonetheless, the nail in the coffin turned out to be the latest reports on the OFE’s merge into one entity. As a result, there was an outflow of the foreign capital on the WSE. Thus, the Polish stock exchange suffered from decreasing level of trading volume.

In the current week, the economic calendar will not be as rich as it was at the beginning of June. However, it is worth paying attention to the final reading of the GDP growth in the first quarter of 2016 for the Eurozone. Moreover, investors will learn some data from China – the balance of trade, the dynamics of the retail sales and industrial production. In Poland, the MPC will hold its meeting - the last time with the participation of Marek Belka.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

After the smooth beginning of the past week on the WSE, the WIG20 was dominated by bears. In the worst moment of the week the index of the largest companies declined below the level of 1,700 pts.. Nonetheless, Friday’s session brought a correction. As a result, the WIG20 managed to end the first week of June at 1,793 pts.. The blue – chip index was in a downward channel. Moreover, the last declines were accompanied by higher level of trading volume which confirmed the current trend. The RSI oscillator remained neutral. The nearest support stands at 1,742 pts. (76.4% Fibonacci retracement), whereas the potential resistance stands at the psychological level of 1,800 pts.

Graph 2: Echo daily. Source: Stooq.

This time it is worth paying special attention to Echo. During the whole week, the share price of the company increased by 10.8%. Thus, a significant price gap was formed. The statement on the payment of a hefty dividend helped the share price to grow. Nevertheless, this year has been very successful for the company – the share price overcame a line of a long – term horizontal trend and approached to its historical peak of PLN 9.55. On the other hand, it should be noted that the RSI oscillator figured out an overbought and it may indicate a sell signal soon.

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

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