There has not been such a reduction on the WSE for a long time. WIG20 is moving away from an important ceiling
The cooling of moods on the WSE comes after a very good October and a quite successful first half of November. A few days ago, new records were even broken: WIG 114,108 points (historical peak), and WIG20 reached 3,066.7 points (the highest level in this bull market, the highest prices since spring 2008.
Deteriorating sentiment on global stock exchanges
The WSE is no exception and it can be hypothesized that the reason for today's declines is the deterioration of global sentiment, with a decline also visible in Asia and Europe. “Global stock markets have reached a monthly low and are below the 50-day moving average for the first time in over half a year. This morning, the Nikkei is falling by over 3 percent, the Hang Seng is falling by almost 2 percent, and futures contracts on American and European indices are clearly in decline. The retreat from risk is also visible in the prices of precious metals, gold is losing 1 percent and silver is losing 1.6 percent.” – wrote Kamil Cisowski, director of the Analysis and Investment Advisory Team at DI Xelion, in his morning comment.
In the afternoon, contracts for American stock indices fell by 0.6-0.7%. According to analysts, there remains uncertainty in the markets regarding the high valuations of technology companies. Investors are withdrawing from risky assets before Nvidia announces its results on Wednesday and the publication of macro data from the US, including about employment. Investors' attention will focus on the release of delayed US macro data – especially the September jobs report – which will provide insight into the outlook for the Fed's monetary policy.
“The market narrative has certainly changed dramatically over the last few weeks as the market reaction function with respect to AI has turned sharply from rewarding ever-increasing capital expenditures to rapidly increasing skepticism about further investment and future returns,” said Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions.
“Artificial intelligence remains a key growth driver, but concerns about potential earnings disappointments and valuation pressure remain. As the year ends, stocks face a balancing act between positive AI momentum and macroeconomic caution. However, we remain cautious and optimistic given strong share buybacks and flow support from companies are likely in the coming weeks,” said Ulrich Urbahn, director of strategy and research for the multi-asset segment at Berenberg.
Concerns about the Fed's actions. There will be no rate cut in December?
Kamil Szczepański, an XTB analyst, believes that the reason for the recent declines is multiple, but the main reason is the FOMC (Federal Open Market Operations Committee, i.e. the Fed body that decides on interest rates in the US).
— Recently, the market has radically changed its valuation of the projected path of interest rate reductions. Just a month ago, investors assessed the interest rate cut in December as certain, today it is already approximately 40%. This is an extremely important factor due to its direct impact on financing costs. The importance of this factor for markets is additionally intensified by the fact that the driving force behind the growth of the American stock exchange in recent months have been technology companies that are particularly sensitive to capital costs, emphasizes Szczepański.
He adds that such a change naturally provokes a change in mood, and the retreat from risk always puts direct pressure on the WSE, which is still in the so-called emerging markets. – It should be remembered that the WSE is still absolutely dependent on capital flows from developed countries, so any deterioration of sentiment abroad will result in a decline in the WIG index, regardless of whether it is justified by fundamental factors – says Szczepański.
The XTB analyst, referring to the large discount of companies such as PGE, Tauron and Enea (which have performed well in recent months), says that the situation is even worse. — These companies are burdened not only with the risk inherent in the Polish market, but also due to the fact that they are State Treasury companies. Companies that, as we have seen many times, will prioritize the interests of the government, not shareholders. Additional risks for Polish companies, especially energy companies, are the growing geopolitical risk, the threat from ETS2 or the opaque monetary policy of the Monetary Policy Council, says Szczepański.
It reminds that the valuations of indices and companies (including Polish ones) have recorded huge increases in recent months. – PGE and Orlen have almost doubled their valuations since the beginning of the year, realizing profits was a matter of time – he adds. WIG20 has gained almost 33% since the beginning of the year, and WIG 36%.
Bitcoin under pressure. Eighth downward session in a row
The decline is also visible on the cryptocurrency market, which some observers describe as a barometer of general market sentiment (according to this theory, the more optimistic it is, the better cryptocurrency prices should be, and vice versa: deterioration of sentiment in the first move is expected to affect this market).
On Tuesday, the Bitcoin price fell by 1% at noon, to $91,316. This is the eighth consecutive declining session and the rate may break the important barrier of 90,000. hole. It has lost nearly 10 percent in the last 10 days. and is moving further and further away from the record high of $126,296. from the beginning of October.
“Everything is currently working against the most popular cryptocurrency. Deteriorating sentiment, outflow of capital from ETFs, automatic closing of positions when subsequent support levels are broken. However, some analysts also draw attention to the cyclical nature of this market, which should now be entering a downward phase. In such a situation, a downward movement may bring BTC at least close to $74,000. Currently, Bitcoin is at its lowest level since April,” wrote the website's analysts. InternetowyKantor.pl
Gold prices are stable on Tuesday. For most of the day, the exchange rate expressed in American currency fluctuated around the Monday closing price of $4,045. per ounce. In the afternoon it increased slightly by 0.7%.
