Weekly Market Review by Anzo Capital

Hi traders,

This thread is dedicated to weekly market reviews from the team at Anzo Capital.

Here, we highlight key market events that have happened over the past week. For more detailed day-to-day analysis, feel free to hop on over to our daily insights page.

Stay tuned!

Anzo Capital
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:calendar: 23 March 2020

Despite unprecedented levels of stimulus from the Federal Reserve, further support will be provided in the coming weeks and months to dampen the impact of an impending recession. The package, which remains open-ended, will not only include bond repurchasing activities but also provide medium-term loans to the corporate sector, purchasing of corporate debt and also loans to a broad range of non-financial sector investors. This came ahead of a series of surveys showing a contraction in output in the US economy for March with both the Composite PMI report and Services PMI report reaching new lows. Output is estimated at 40.5 points for the month as the private sector struggles to come to terms with the COVID-19 outbreak.

:calendar: 30 March 2020

The UK Services sector saw the sharpest decline in over 20 years during the month of March as the Coronavirus continues to pose both a medical and financial threat to the British and global economies. The final reading of the PMI survey suggested the sector contracted to 34.5 points, down from 53.2 in February. The decline was led by a drop in new work and job losses.

The labour market signalled a recession on Friday as the Non-Farm Payroll report indicated over 700,000 job losses for March. To give some perspective, the result represents the worst monthly decline since the Sovereign Debt Crisis in 2009. The unemployment rate also climbed to 4.4% during the month. 6 million jobless claims were filed last week despite the $2 trillion stimulus package announced by Congress in the previous week. Additionally, the manufacturing sector moved into contractionary territory in March although the dip was not as bad as initially forecast.

:calendar: 06 April 2020

In a series of Eurogroup meetings, ministers agreed to a 540 billion Euro ‘virus’ stimulus package in a bid to support the Eurozone. The committee failed to agree on a mutual ‘corona’ bond to implement fund raising for the bailout. Further, ministers have reached a consensus on the need for a recovery fund, yet, again, disputes continue with regards to how these stimulus measures will be funded.

Another 6.6 million people filed for unemployment benefits in the U.S. last week, despite the Fed announcing its 2.3 trillion-dollar lifeline in the form of loans to both households and employers of all sizes. The OPEC+ alliance of global oil producers agreed to a much needed 10 million barrel per day supply cut, which should provide some relief to the battered commodity amidst continuous demand shocks. U.S consumer prices contracted by 0.4% in March with the annualised rate of inflation coming down to 1.5%, as lockdown conditions impede demand despite interest rates being at an all-time low.

:calendar: 13 April 2020

Consumers in the U.S. may not be able to shore up the economy. A contraction of 4.5% in March indicates that consumer spending has been significantly impacted by the virus situation, despite a variety of online options. The figure represents a slight slowdown in contraction when compared with February, however climbing unemployment is likely to result in further pressure on consumers’ disposable income. Unemployment claims climbed to over 5 million last week indicating some deceleration in workers leaving the labour market. However, the full impact of the pandemic may take months to unfold.

China Trade Balance data was surprisingly positive with a 139 billion Yuan surplus. It represents a paltry 0.9% decline when compared with the previous year. One explanation may be that the figure does not fully represent the contraction in demand from the West; that the impact of closures will be felt in the coming months. Economic growth and industrial output figures tell perhaps a truer tale, with a contraction in GDP of 6.8% in the first quarter when compared with the same period in 2019. Industrial production declined by 1.1% year-on-year.

:calendar: 20 April 2020

Macroeconomic data coming out of the UK was mixed for March; as fewer people left the labour market than forecast with a rise of 12,000 claimants. Similarly, inflation figures fell slightly on the month to 1.5% against a previous 1.7% as prices related to household activities rose; such as electricity, water and gas. Prospects for the economy continue to look grim, however, with the fastest rate of decline in output for the private sector in April. Eurozone data also represented a mixed bag; with Germany faring well as the ZEW Sentiment report unexpectedly climbed 77.7 points in April. Despite optimism amongst investors and economists in Germany, Eurozone output figures collapsed in April to 13.5 points as shutdowns continue to impact the bloc.

Unemployment in the U.S. for rose another week, as 4.4 million citizens filed for jobless claims. Last week’s figure combined with the previous four weeks takes the number of unemployed Americans to 26.45 million. In similar fortunes, US Durable Goods Orders fell at the sharpest rate since the survey began; contracting by 14.4% in March. The fall was led by the transportation survey with automobile manufacturers and Boeing suffering the worst month on month declines.

:calendar: 27 April 2020

Eurozone growth data was unsurprisingly disappointing as the bloc continues to be plagued by COVID-19 and its ill-effects. GDP plummeted by 3.8% in the three months ending March representing the worst fall since recording began in 1995. In the ECB Press Conference last week, President Lagarde indicated that the Pandemic Emergency Purchase Programme (PEPP) would be extended. Although Lagarde lacked the conviction markets hoped for, the willingness to implement measures has provided support to the Euro amidst a weakening U.S. Dollar.

U.S. GDP figures went negative for the first time in 6 years representing one of the lowest readings since the recession. First quarter growth fell 4.8% with consumer spending plummeted by almost 7% as a result of lockdowns. The Fed kept current policies unchanged and emphasised their readiness to provide further support to the economy as needed. Chairman Powell indicated that some moderate recovery of growth may begin as some states begin to open up under tighter regulations. However, initial jobless claims rose more than expected last week to 3.8 million, though some solace can be taken from the declining trend. Data from Manufacturing PMI reports indicated an economic contraction worse than that seen during the Great Recession of 2009. Production, new orders and employment figures all plummeted.

:calendar: 04 May 2020

The U.K. Markit Services survey indicated a rapid decline in the sector which had hit 34.5 in March. April’s reading fell to 13.4 points due to business closures and a decline in sales for non-essentials. The contraction indicates a deep, broad-based downturn for the second quarter. The Bank Of England maintained its asset repurchasing programme, however, there are indications that a few committee members are in favour of further stimulus. The ECB stimulus programme took a blow this week, as a German court ruling indicated a violation in German constitution in the monetising of debt instruments. However, a spokesperson for the European Commission reiterated that EU law takes precedence. The court ruling could see the Bundesbank pull out of the ECB bond purchasing programme, though the move would not impact the stimulus provided for COVID-19.

The U.S. Non-Manufacturing sector had its first contraction in growth since the end of 2009, breaking 122 months of expansion, with a posting of 41.8 points for April. Business activity unsurprisingly led the decline which hit 26 points; the lowest since the survey began. Given this backdrop, more Americans moved out of the labour market in the last week according to the U.S Department of Labour. As of 2nd May, a further 3.16 million citizens filed unemployment claims. The Non Farm payroll report provided further grim news with a total of 20 million US citizens moving out of the labour market in April. Figures show the worst the employment situation since the Great Depression, with the unemployment rate spiking to 14.7% representing the worst result in almost 60 years.

Weekly Market Review by Anzo Capital
:calendar: For the week of 11 May 2020

On Federal Reserve Chairman Powell and Euro Area Economy

U.K. growth figures came out better than expected for the first quarter despite government intervention to reduce activities in March. A contraction of 2% was observed in the three months ending March. Eurozone growth suffered in the first quarter with a decline of 3.8% where contractions in major economies proved to be asymmetric. Germany contracted 2.2% as expected yet growth figures for France and Italy remain a concern.

Deflation fears hover over the U.S, as the CPI index recorded the second consecutive month of decline in consumer prices since 1982. In April, the headline figure pulled back by 0.8% indicating annual inflation has now dropped to 0.3%. Federal Reserve Chairman Powell indicated that negative interest rates were not being considered by the committee in response to worsening economic conditions on the basis the results of such policies are ‘mixed.’ Further, Powell indicated that further intervention would likely be required in the form of fiscal policies when tackling the economic devastation caused by the pandemic. A decline in the number of jobless claims provided some silver lining however, the number of new filings remained higher than forecast at 2.98 million in the week ending 9th May. Retail sales plummeted by 16.4% from March to April as shutdowns weigh on shops and climbing unemployment starts to impact spending. Sales have fallen over 21% in the last 12 months.

Weekly Market Review by Anzo Capital
:calendar: For the week of 18 May 2020

On U.S. Unemployment Claims and Bank Of Japan

U.S unemployment claims declined for the seventh consecutive week although the number of claims remains at a high of 2.44 million. The trend is expected to continue as more states prepare to reopen, however, given the new restrictions, job creation is likely to take some time. There was also some good news in the Manufacturing sector, with output contracting less than estimated for May. Demand does continue to be weak with the index indicating a rise to 39.8 points, up from 36.1 in April. Both numbers do point to a record low rate of growth in the second quarter.

The Bank of Japan held an emergency meeting at the close of markets last week in a bid to discuss the required support amidst the COVID-19 outbreak. Although the bank left interest rates and its asset repurchasing programme unchanged, the committee made a commitment to provide a lending facility to small businesses impacted by the global pandemic.

Weekly Market Review by Anzo Capital
:calendar: For the week of 25 May 2020

On Germany and U.S. Economy

Economic conditions in Germany remain challenging with initial estimates suggesting a contraction in consumer prices at 0.1% as the country’s major trading partners begin to come out of lockdown. Confirmation of GDP estimates on Monday put first quarter growth at -2.2% indicating that Europe’s largest economy has entered into a recession. Despite the news, German companies are more optimistic after a devastating couple of months. The light at the end of the tunnel is the gradual reopening of economies which led to improved prospects for future conditions and inspired a rise in the index to 79.5 point for May.

The second estimate of U.S economic growth for the first quarter indicated the slowdown is worse than initial measurements. GDP for the three months ending March, came in at a contraction of 5%. Stay at home orders issued in March attributed to the poor first quarter performance. President Trump announced sanctions against China on Friday in response to the “smothering” of Hong Kong. He further stated that the U.S. has pulled out of the WHO, as he believes that China has a controlling influence on the organisation. No mention was made of the phase one trade deal. US Durable Goods Orders plummeted 17.2% in April indicating that second quarter growth may be worse than the first quarter.

Weekly Market Review by Anzo Capital
:calendar: For the week of 1 Jun 2020

On European Central Bank and U.S. labour market

The European Central bank increased its Covid-related bond repurchasing programme by 600 billion Euros in the last committee meeting, with the programme extended until July 2021. The bank had been criticised for not taking more decisive action where other central banks moved quickly to provide support for their economies. The UK Services sector which is the largest contributor to GDP, continues to be weak with a decline to 29 points in May albeit at a slower pace than April. Cutbacks by businesses and reduction in spending has led to a drop in new work and a decline in employment.

The US labour market added over 2.5 million jobs in May after 20 million losses in the previous month with the unemployment rate reaching 13%. The partial reopening of the food and beverage and hospitality industries contributed the most to the rise in new jobs. OPEC nations agreed to extend the output cut by another month to the end of July representing a 10% reduction in global oil supply.

Weekly Market Review by Anzo Capital
:calendar: For the week of 8 Jun 2020

On UK Economy and U.S. Federal Reserve

Last week finished with a devastating result for UK growth, as the UK economy plunged over 20% in April representing the largest drop in growth ever seen. The fall has been attributed to widespread closures of bars, restaurants and shops. Manufacturing and construction also took a hit as output grounded to a halt and trade with the rest of the world declined. On a similar note, German Industrial Production fell more than forecast at almost 18% in April as the lockdown policy stymied output. ECB President Lagarde reassured EU members and citizens that the response to the crisis was “temporary, measured and proportionate” in her recent address at the European Parliament. Given the years of quantitative easing policies, sceptics may question whether the extra stimulus is akin to throwing money into a black hole.

In the June FOMC meeting, the committee elected to leave policies unchanged and signalled that monetary easing policies would likely continue for a number of years. Growth remains a concern for the Fed and there still appears little appetite for negative rates. Core CPI fell by 0.1% in May representing first time in history that the indicator has suffered three consecutive months of declines.

Weekly Market Review by Anzo Capital
:calendar: For the week of 15 Jun 2020

On Euro Covid Rescue Plan and U.S. Retail Sales

Last week finished with EU leaders finally sitting down to thrash out the 750 billion Euro Covid rescue plan. Germany and France have led the talks with urgency, indicating their preference for a deal by next month. The Bank Of England announced further stimulus for their bond purchasing program, adding another 100 billion Pounds, due to concern over mounting unemployment and the likelihood of a longer-term recovery as a result. Labour market data released by the Office For National Statistics indicated that 600,000 people left the labour market in May.

U.S. retail sales had a record-breaking month in May with an almost 18% rise. The result was surprising not least because there was a 14.7% drop in sales in the previous month. One of the biggest surges came from F&B establishments which saw a 29.1% rise in May after the lockdown period. Chairman Powell reiterated concerns regarding the recovery to the Senate Banking Committee, indicating that employment remains a concern despite some impressive results in last month’s new job creation.

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Weekly Market Review by Anzo Capital
:calendar: For the week of 22 Jun 2020

On Euro Area Economy and U.S. GDP

Signs of recovery are beginning to spread around Europe, as easing of restrictions result in some rise in output. Eurozone and German Composite PMIs registered a second month of growth. Some of the worst ever readings, in terms of production and orders, have begun to move in a more positive direction with the Eurozone recording a rise to 47.5 points; a 4-month high. Both the UK manufacturing and services sectors showed improvements, with the manufacturing sector rising the most, month-on-month, since records began. The Services Business Activity Index posted a rise to 47 points, which is better news for economic growth.

The third estimate of U.S. GDP confirmed a contraction 5% for the first quarter of 2020. Unsurprisingly, personal consumption expenditure and exports led the decline as a result of widescale restriction of movements in countries across the world. Expectations for a better second quarter were boosted by a growth of 15.8% in Durable Goods Orders, which tend to be longer-lasting manufactured products. Unemployment claims remained higher than estimated with 1.5 million Americans filing for benefits in the week ending 20th June.

Weekly Market Review by Anzo Capital
:calendar: For the week of 29 Jun 2020

On U.S. Labour Market and China Economy

U.S. Labour market statistics were mixed in June; Non-Farm Employment data showed that 4.8 million Americans were added to workforce, yet the number of people claiming unemployment benefits remains at 31.5 million. Despite reopening, caution remains, with worries that a second wave may hit certain states. Further, the Paycheck Protection Program which provides further unemployment benefits will be coming to an end this month. However, Treasury Secretary Mnuchin revealed $140 billion in loans to be redistributed to industries most impacted by the Covid-19 lockdown such as the Food and Beverage sector.

China may be seeing the first signs of growth for the economy. PMI surveys showed steady activity in June with the Manufacturing sector posting an expansion of 50.9 points. Given the forward-looking nature of the industries surveyed, the result indicates optimism amongst China’s largest manufacturers for June. The services sector experienced the fastest pace of growth in 7 months with a reading of 54.4 points.

Weekly Market Review by Anzo Capital
:calendar: For the week of 6 Jul 2020

Shocking News From Europe!

Hopes of a speedy recovery in Europe faded away after the European Commission released its growth forecasts for 2020 and 2021. The estimations were far worse than anticipated and cast a dark cloud over the bloc’s potential recovery. Major economies such as France and Italy are expected to have double-digit contractions for the year. The Commission lamented that the economy was taking longer than expected to recover and that the Eurozone, as a whole, would see growth drop to -8.3%.

Unemployment claims in the U.S. are beginning to fall, as the number of Americans filing for benefits dropped more than expected to 1.3 million for the week ending the 5th July. Growth is also beginning to return to the non-manufacturing sector after two months of contraction. The sector registered 57.1 percent growth for June, the largest month-on-month rise since 1997.

Weekly Market Review by Anzo Capital
:calendar: For the week of 13 Jul 2020

Did You Miss These Major Trading Events?

U.S. retail sales rose more than expected for the month of June climbing to 7.5% and adding to the 18.2% rise in May. The trend indicates the beginning of a recovery, although persistently high unemployment and fear of a second wave of Covid-19 infections has impacted consumer confidence. Unemployment claims ticked up in the week ending 10th July, with 1.3 million Americans seeking unemployment support. Rising gasoline prices saw U.S. inflation rise by 0.6% month-on-month in June, representing the largest single month increase since 2012. The surprise in June is not expected to result in any inflationary pressure in the longer-term.

China managed to avoid a recession with second quarter growth coming in at 3.2% compared with a contraction of 6.8% in the first quarter. Demand for Chinese goods improved during the period; as reflected in exports and fixed asset investments rose markedly. The Bank Of Japan left policy unchanged in their July meeting; predicting that improvements to economic indicators would take place in line with economic recovery from the Covid-19 pandemic. The bank highlighted that the annual inflation was likely to remain negative for the time being.

Stay informed with our real time comprehensive market analysis reports and financial news here.

Weekly Market Review by Anzo Capital
:calendar: For the week of 20 Jul 2020

Is It Time To Bet Against The US Dollar?

After much doom and gloom there was resoundingly good news to end the week for UK and European economies. Purchasing Managers Index reports indicated a month of expansion for both Services and Manufacturing sectors for July. Europe’s largest economy, Germany, saw the first month of expansion in the manufacturing sector in 18 months. Given the impact the sector has on growth in the greater economy and the impending recession, the news will provide some respite to the markets. The rise in output comes amidst a breakthrough during the EU summit where leaders managed to agree a covid-19 bailout to the tune of 750 billion Euros. In the UK, the Services sector, which has been the backbone of the economy, hit a 5 year high in July reaching 56.6%; with the 50-mark representing expansionary territory, as the reopening of the economy spurred optimism.

The employment situation paints a bleak picture for anyone hopeful of a fast recovery in the U.S. Jobless claims spiked once again in the week ending the 17th July as the covid-19 situation persists in certain states, leading to a rise in new infections. After trending downwards for May and June, unemployment benefit claimants climbed to 1.4 million last week. A total of over 30 million citizens remain unemployed as of 4th July.

Stay informed with our real time comprehensive market analysis reports and financial news here.