US indices started the week by declinig after Tuesday’s macroeconomic reports. New Home Sales in the United States declined by 8.3% on a monthly basis to 795K, which is the lowest level since 2000. The gravity of the problem showed the home prices decline by 7.5% on a yearly basis. That is the biggest drop since 1970. Those publications increased the possibility of another interest rate cut by the Federal Open Market Committee. The last federal funds rate cut by 50 basis points to 4.75% was the first since 2004, when the Fed started tightening monetary policy. Also consumer confidence, measured by the Conference Board, declined to 99.8, much more than analysts expected. The news brought indices down but just for one day. Both, the Dow Jones Industrial Average (DJIA) and the S&P 500, rebounded to finish the week higher than they started. The DJIA ended Thursday at 13,915 gaining 0.36% during the whole week. The S&P 500 advanced 0.40% to 1,530.5 on Thursday. On Friday, both indices opened at -0.06%.

Along with the problems on the US housing market and concerns about another interest rate cut by the Fed, Asian companies advanced, even lifting Hong Kong’s Hang Seng to a historic all-time high. Cutting the federal funds rate will weaken the American dollar even further making Asia a more attractive market to investors. The Japanese benchmark stock index, the Nikkei 225, rallied 3.00% to 16,768 reaching even 16,900 during the last session. The winner on the Asian market was Hong Kong’s stock average. The Hang Seng broke the 27,000 points barrier for the first time ending the week at 27,136. What makes Hong Kong so attractive to investors is the expected future inflow of capital when China mainland investors will invest their money on the HK stock exchange.

Surprisingly, the Polish benchmark index, the WIG 20, did not follow the American indices. The Warsaw Stock Exchange’s major index started the week at 3,766 to decline almost 3.5% to 3,640.  Macroeconomic publications were certainly not the reason since they were good for investors. Retail sales in August increased by 17.4% against the 16.6% increase that analysts expected. Unemployment rate remained at 12%. The most important financial event was the Polish Monetary Policy Council (MPC) meeting. The MPC kept interest rates in Poland at 4.75%, which caused the WIG 20 to advance. But since Thursday morning, the Polish benchmark index has been on a decline reaching 3,658, an important support level. It marks the 41.4 Fibonacci retracement level of the upward trend, which started on September 10^th. During the last hour of trading, the WIG 20 broke this support level and dropped to 3,635. This week’s decline can be treated as a correction movement and an expectation for further increases.  

Adam Narczewski