Weekly comment MM Prime TFI - July 13, 2015
If you look at the charts of most major indices of European stock exchanges, including the Warsaw Stock Exchange, you will see that in the last week they all looked almost the same. The charts resemble a bit the shape of a parabola. It is all due to European investors’ mood changes. From a negative at the beginning of the week (after 5th of July when majority of Greeks voted “No” in referendum) to a positive at the end of the week, when information was released that the government of Greece is able to accept almost all terms of the agreement, which they had previously rejected. Another factors affecting market sentiment were huge decreases on Chinese stock exchanges, where in less than a month shares lost almost 1/3 of its value. The end of the week brought an improvement, but we can not say that it is a permanent change in investors’ moods, because Chinese government had bigger contribution to the share growth than market forces. During the whole week the DAX rose by 2.3%, but in the meantime it went down to the lowest levels since last February. London's FTSE250 was at the lowest level since last April, but it managed to bounce back a little and the index ended the week 0.7% in red. Similarly the CAC40 was at more than a 5-month minimum for a moment, but during the entire week it increased by 2%. In Poland the WIG made new lows of current downward trend and the index closed last week 0.3% in negative territory. The WIG20 fell permanently below the level of 2300 points. During last week the index lost 0.3%, but in the meantime it was at the lowest levels since September 2013. The mWIG40 and the sWIG80 dropped by 0.4% and 0.5% consecutively. Last week, after a two-day meeting the MPC did not change interest rates in Poland.
Greece and China also had an impact on the behaviour of investors in the US. Additionally, the ISM and the PMI indices for American services were published. They were in line with the market consensus. Another important publication in the US was minutes from the June FOMC meeting. The tone of the minutes was rather dovish, but the Fed did not rule out raising interest rates later this year. During last week the DJIA rose by 0.2%, the NASDAQ went below 5,000 points and closed the week with a 0.2% loss. In the past week the S&P500 index did not change its value in comparison to the previous week.
This week the most important macro data will be the consumer price indices for Germany, Poland and the euro zone. Furthermore, the data about retail sales, the number ofuilding permits, as well as the PPI and CPI indices in the United States. The GDP readings for the second quarter andthe data on industrial production and retail sales in China can be worthwhile as well. Last weekend summits of the Eurogroup and the eurozone leaders on financial aid for Greece did not bring a solution. On Monday morning, the conversation was continued and according to the reports, an agreement has finally been concluded.
Graph 1. WIG20 daily. Source: Stooq
This week the WIG20 unfortunately deepened last week's declines and reaching 2,203 points set new lows of the current downward trend. Bears managed to break through support level, which was the hole from 16th January, but thanks to Thursday's and Friday's sessions the index managed to return above and eventually stopped at the level of 2270 points. The blue-chip index lost 0.3% since the beginning of the week. The course has reached the support zone of the over two-year consolidation, thus the likelihood of upward rebound increased. In addition, it is worth mentioning that on the weekly chart the hammer formationappeared, so the chance of a bounce back increased even further. The nearest support level is, like a week ago, at a January hole, 2,225 points. The nearest resistance is located at about 2,300 points.
Graph 2.. CI Games daily. Source: Stooq
CI Games deserved the company of the week name. Within last week share price of one of the biggest Polish computer game producers grew by 20.2%. At the end of May the course stepped out from a 5-month consolidation and has almost doubled since then. Confirmation of the strong uptrend is an upward break from the flag formation with right textbook behaviour of the volume. The RSI oscillator chart showed a divergence, so in the near future investors should be prepared for a possible course correction.
Authors: MM Prime TFI S.A. Investment Management Team
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