A big surprise in inflation data
In a decisive majority, the surprises were concentrated among blue‑chips and stemmed from MSCI index rebalancing.
On the domestic front, we learned the preliminary reading of May CPI inflation, which delivered a sizable surprise. In the previous month, inflation in Poland slowed to 3.1% year‑over‑year, with a forecast assuming an acceleration to 3.7% year‑over‑year. The rare scale of surprise at 0.6 percentage points was due to a drop in food prices and a stable core inflation component.
Our attention is particularly drawn to core inflation, which according to preliminary estimates was 3–3.1% in May, confirming the absence of “second‑round effects” after the rise in gasoline prices.
Such a large surprise in inflation data significantly reduces the forecasted price dynamics in the coming months. Many indications suggest that CPI inflation will not exceed the upper bound of the target deviation (3.5% year‑over‑year) in the near future, giving the RPP the comfort to keep interest rates unchanged.
On Friday, the yield of Polish bonds
At the conference after the last RPP meeting, President Glapiński suggested that the stimulus for interest‑rate hikes in Poland would be inflation exceeding 3.5% year‑over‑year and staying above that level persistently. Currently, neither of these conditions is met, which should reinforce market confidence in the “wait‑and‑see” scenario.
On Friday, the yield of 10‑year Polish bonds fell by 15 basis points. In our view, the market’s conviction that interest rates will remain unchanged could bring 10‑year yields below 5.5%. Meanwhile, on Wall Street, Friday ended with further record highs for the major indices.
For the S&P 500, a 0.22% rise sealed a ninth consecutive weekly rally. Such a streak has occurred only eleven times in the post‑war history of the U.S. equity market. A longer rally occurred only four times, so bullish statistics for the next week are not very favorable.
Dell shares surge 30%
On Friday, the star of the overseas session was Dell, whose shares surged over 30%, marking the best session in its trading history. The company released results the day before and significantly revised its full‑year revenue forecast upward due to growing demand for servers to support data centers.
Investors also counted on an early agreement between the U.S. and Iran being within reach. Ultimately, however, it again ended in suggestions, and both sides, according to media reports, remain in the negotiation phase. At the time of writing, oil prices are rising by over 2%.
The lack of resolution in the Middle East coincided with intensified Israeli attacks on Lebanon. Given recent market behavior, investors began to factor in the possibility of an early agreement by the end of May. Therefore, further postponements and lack of specifics could, in our view, weigh on market sentiment in the coming days.
