Summary

The second week of October brought an increase in probability of the American interest rates raise. The minutes from the last meeting of the FOMC turned out to be slightly less hawkish than expected. Nevertheless rising oil prices caused a growth in the inflationary expectations. Moreover, in October most of the economic data readings did not fail. Last week investors learnt the PPI - it stood at 0.7% y/y vs 0.4% expected. Furthermore, the dynamic of the retail sales amounted to 2.7% y/y. The result was in line with market consensus. Therefore, despite the fact that the latest data from the American labor market turned out to be quite disappointing, the FOMC seemed to be in favour of monetary tightening. The market expected that the Fed would change the cost of money in December. Nonetheless, the specter of the interest rate raise did not support the American stock indices. During the whole week, the NASDAQ went down by 1.5%, the S&P500 fell by 1% and the DJI deteriorated by 0.6%. Meanwhile, in Europe the market sentiment was rather bullish – German DAX rose by 0.9%, French CAC40 grew by 0.5%, whereas British FTSE250 went down by 0.1%. Investors learnt the Sentix index which significantly exceeded projections. It stood at 8.5 pts. vs 6 pts. expected. In the Euroland the dynamic of the manufacturing production did not fail as well. It amounted to 1.8% y/y vs market consensus at 1.3%. A lot of market emotions aroused by the publication of the Chinese balance of trade. Exports of the Middle Kingdom shrunk by 10% in September.

In Poland the attitude of the medium – sized companies was once again really good. During the whole week, the mWIG40 went up by 0.6%. Unlike to it, the WIG20 decreased by 1.8% and the sWIG80 fell by 0.6%. Special attention should be also paid to JSW and Prairie. The former continued its rally and approached the level of PLN 70. The latter managed to nearly double its value. Thus, the company of the week name deserved the Australian company. It is worth paying attention to the latest reading of inflation. The CPI stood at -0.5% y/y vs -0.8% expected. Deflation was definitely weakening, whereas this did not generate any increased expectations concerning the monetary tightening by the MPC.

The highlight of the current week will be the meeting of the ECB’s Governing Council. Some investors expect that the bank will expand the QE. Investors will learn the minutes from the last meeting of the MPC as well. In addition, it is worth paying attention to the latest economic data from the US, China, the Euroland and Poland. The market will also follow the race for the White House.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

During the whole week the WIG20 was moving towards south. As a result, the index ended Friday’s quotations at 1,719 pts.. Lately the index of the largest Polish companies was in a sideways trend. The RSI oscillator remained neutral. In the current week the WIG20 may test the support level at 1,700 pts.. Its breakthrough will probably be a signal for the start of a new downward wave. However, it does not seem that the market sentiment is much bearish, so the blue – chip index will probably defend the level and remain in a sideways trend.

Graph 2: Prairie daily. Source: Stooq.

We chose Prairie as a company of the week. During the last five trading days, the share price of the Australian company increased by 94%. As a result, the period of the consolidation was ended. However, the course was not able to break the level of PLN 1.50. The stochastic oscillator and the RSI oscillator indicated sell signals. Thus, in the near future a correction can be expected. Recent growths were investors’ reaction to the purchase of Debiensko mine by the company. It is worth noting that the long – term prospects of Prairie seem to be quite promising, because the company has just starting its flagship projects in Poland.

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

This material is intended to be for informational purposes only and does not constitute any investment, legal or tax advice or any other type of advice nor constitute an offer according to the Civil Code or a public offer within the meaning of the Act on Public Offering. MM Prime TFI SA has done due diligence to ensure that the information contained in this presentation is accurate and based on reliable sources. MM Prime TFI SA is not responsible for the accuracy and completeness of the information, nor for any damage that may arise from the use of it. Nothing in this document should be construed as an investment advice. The use of this material as the basis or evidence to make an investment decision takes place at the sole risk of the person who takes such a decision. This material is available free of charge.