Weekly Market Review by Anzo Capital
For the week of 27 Jul 2020
Worst Ever Result For The US
The headline event of the week was U.S. GDP which recorded its worst ever quarter-on-quarter decline; plunging 32.9%, which was only slightly better than forecast. Clearly concerned, the Fed announced an extension of its enhanced lending facility which was due to end in September. The stimulus will continue until the end of the year, as the Fed aims to provide some certainty of support by way of increased credit facilities to households, businesses as well as state and local governments. Governor Powell reiterated the importance of the path of the pandemic in defining the recovery for the economy. Key metrics such as consumer spending and employment have seen initial recoveries curtailed by secondary spread. Labour markets and normal inflation may take several years to return to pre-Covid levels, as seen with yet another week of rising unemployment claims to 1.434 million for the week ending 25th July.
The Manufacturing sector in China saw another month of contraction to 51.1 points in July, up from 50.9 in June. The growth represents the highest reading since March. Climbing exports from other Asian nations, such as South Korean and Japan, contributed to the rise. Many market commentators claim that China is ‘not out of the woods’ yet, and that the increase in output is due to demand for pandemic-related products and rising activity as a result of the lifting of lockdown restrictions.
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Weekly Market Review by Anzo Capital
For the week of 3 Aug 2020
The Biggest Trading Themes In Forex Right Now
The Bank Of England decided to leave interest rates unchanged in their policy meeting last week, with the Bank rate remaining at 0.10%. Similarly, total asset repurchasing remains at £745 billion. Governor Bailey reiterated that negative rates were “in the toolbox” but that the bank had no current plans to take interest rates below zero. Germany’s Manufacturing sector moved out of contraction in July, posting an expansionary 51 points and providing relief to a weakened economy.
In the U.S., the employment situation worsened in July after a positive month in June. A total of 1.76 million workers joined the labour market for the month of July, yet hiring was mostly governmental and seasonal; with new jobs created for Census 2020.
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Weekly Market Review by Anzo Capital
For the week of 10 Aug 2020
Is The USD Onto A Winning Streak?
Retail sales in the U.S. came in better than expected at 1.9% in July, just as markets were beginning to speculate of further weakening. The lift in spending is significant considering over 60% of U.S. GDP is derived from U.S. consumers. Retail sales still remain volatile, however, as the country continues to grapple with secondary spikes of Covid-19. Employment also remains a concern, as spending may be fuelled by extra government support and many Americans remain out of work. The number of people applying for unemployment benefits fell below 1 million in the week ending 9th August, representing an almost 230,000 drop in claims from the previous week.
China’s recovery is currently being led by industry as consumption, most specifically, domestic consumption remains a concern. CPI data came out better than expected at 2.7% in July. A spike in food prices, notably pork, contributed to the rise. Retail sales contracted in July by 1.1% against a forecasted rise of 0.1% as consumers have curtailed their spending. In contrast, industrial production saw yet another month of growth, rising 4.8% in July.
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Weekly Market Review by Anzo Capital
For the week of 17 Aug 2020
Japanese Yen Comes Under Pressure
Mixed fortunes headlined last week for Eurozone and U.K. economies. Data from purchasing managers indicated a softening of growth in the Eurozone for August. Both Manufacturing and Services sectors saw growth slow to 2-month lows, however, output in the manufacturing sector saw the largest surge in output for over two years. The UK economy fared better; with the sharpest rise in output from the private sector in almost 7 years. Employment remains a concern, however, as both sectors experienced significant job losses for the month of August.
Preliminary GDP data for Japan indicated that the third largest economy in the world contracted by 7.8% in the second quarter, representing the worst pace of growth in 40 years. The pandemic has been a blow to the export reliant economy and a recent surge in cases will result in a long, protracted recovery. Early indications suggest that output from Japan’s manufacturing sector continued to contract in August which dampens hopes for an output recovery in the third quarter, highlighting the potential for a three consecutive quarters of contraction.
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Weekly Market Review by Anzo Capital
For the week of 24 Aug 2020
Did You Miss The Fed’s Announcement?
In July, Durable Goods orders rocketed by 11.2% compared with a rise in orders of 4.3% in the previous month. Long-term capital goods orders, which exclude the more volatile transport component, slowed. The index is considered a measure of companies’ willingness to make longer-term investments. The relative pullback to 2.4% suggests a cautiousness amid pandemic uncertainty. Preliminary GDP data confirmed that second quarter growth, although not as bad as originally forecast, still had the worst quarterly drop on record. The shock to output is attributed to the lockdown conditions implemented as a result of the Covid-19 outbreak. At the same time, unemployment remains high; at 10.2%. To date, there are still over 1 million U.S. citizens claiming unemployment benefits as of the week ending 23rd August. The headline event of the week was the Jackson Hole Symposium where Federal Reserve Chairman Powell, indicated that the central bank intends to implement average inflation targeting, effectively allowing the target rate of inflation to overshoot the 2% rate for periods, in order to balance times when the rate has undershot target. The reasoning behind the policy change is the relative ineffectiveness of certain inputs which previously ignited inflation. The key takeaway from the meeting: rates are not going to rise any time soon.
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Weekly Market Review by Anzo Capital
For the week of 31 Aug 2020
Everything You Need To Know About The Markets Right Now
A measure of consumer prices in Germany; the Harmonised Index (which is a key metric for the ECB) has shown a 0.1% contraction in August. The contraction comes despite a VAT reduction in July; which boosted food and clothes prices, yet, falling energy prices represented a greater drag on the index. Output in Europe’s largest economy climbed to a 30-month high in August, as exports and confidence begin to rise, providing a more positive outlook for employment in the sector.
In the U.S., August’s Employment situation was a mixed bag; although gains were made in job creation, with 13.7 million new workers added to the labour market, the rise still represented a slowdown when compared with July’s figures. The unemployment rate dropped significantly to 8.4% yet the result still indicates recessionary conditions for the U.S.
The Manufacturing sector in China saw a strong recovery in August, rising to 53.1 points. According to the Caixin index, new orders, production and export sales were the largest contributors to the rise. The expansion represents the fourth consecutive month of growth and reflects a slow but steady recovery from the pandemic.
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Weekly Market Review by Anzo Capital
For the week of 7 Sep 2020
Eurodollar Ready To Take Off?
Last week saw better macroeconomic data coming out of the Eurozone. Quarter or quarter growth was positively revised to a contraction of 11.8% versus the initial estimate of 12.1%. Final employment change was disappointing; dropping 2.9%. Investors are also becoming more optimistic according to the Sentix Investor Confidence survey and despite the index remaining in negative territory, August’s rise represented the 5th consecutive month that sentiment improved. The rise in confidence comes as the bloc is on track to make a recovery from the pandemic. On Thursday, the ECB played down the rise in the Euro, indicating exchange rate targeting is not a current policy focus. The bank made no changes in its current policy during its August meeting. Across the water, UK growth figures showed a rise in final output of 6.6% in July 2020. However, the result remains in stark contrast to pre pandemic levels at an almost 12% slower pace when compares with growth measured in February 2020. The biggest drag on the index was both production and construction. Manufacturing production continues to recover with a 6.3% rise in July.
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Weekly Market Review by Anzo Capital
For the week of 14 Sep 2020
Time To Sell GBP Pairs?
The Bank of England stated its intention to look at negative interest rates in the coming quarters as Britain’s economy faces rising COVID-19 cases, higher unemployment and a possible new Brexit shock. Positive signs of recovery in the economy compelled the committee to keep the current stimulus program intact at the recent policy meeting. The UK labour market also improved beyond expectations with fewer citizens filing for unemployment benefits. Annualized inflation came in at 0.5% in August against 1.1% growth in July with recreational activities unsurprisingly having the largest contribution to the price rise. Optimism continues in the German economy as fiscal stimulus provided investors with hope of a recovery. The German ZEW Sentiment report rose 5.9 points for September.
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Weekly Market Review by Anzo Capital
For the week of 21 Sep 2020
The Closest Presidential Race in History?
The labour market situation in the U.S. remains fragile, as 870,000 citizens filed for unemployment benefits in the week ending 20th September. The hanging threat of further lockdowns has created uncertain business conditions in some customer-facing industries, despite a general rise in economic activity. PMI data suggests that both services and manufacturing sectors remain in expansion, but that service sector recovery may be slow-paced. Durable Goods orders fell more than expected in August after a second wave of Covid-19 curtailed output. Growth of new orders reached 0.4% against July’s rise of 11.7%.
The presidential race looks to be a close contest according to a Reuters/Ipsos poll with few votes separating the two candidates; Biden and Trump. In six pivotal states surveyed by the poll, results showed that Biden has a very slight edge against current president Trump. However, all states considered that Trump would manage the economy better, where Biden was assessed to have better prospects of managing the pandemic. The more pressing issue for citizens will likely determine how they vote.
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Weekly Market Review by Anzo Capital
For the week of 5 Oct 2020
Bad News For The Euro
The Eurozone’s Composite Index showed the bloc just edged into expansionary territory in September, led by expansions in both Germany and Italy. Several Eurozone economies remain in contraction. The Services sector became the biggest drag on the index with the union posting a contraction of 48 points for the month. The slowdown may signal a weak period of growth going into the fourth quarter. One solace will come from the recovery in Germany’s manufacturing industry, which recorded a 4.5% rise in growth for the September. However, this represents a contraction of 2.2% from the previous year. The UK economy registered a third month of growth in the Services sector in September. The pace of growth appears to be slowing however, with the sector expanding by 56.1% compared with 58.8% in August. Economic growth in August reached 2.1% missing expectations of 4.6% growth. Comparatively, current growth levels are almost 10% off the pace of pre-Covid levels.
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Weekly Market Review by Anzo Capital
For the week of 12 Oct 2020
Who Will Win: Euro Or Pound?
Last week started with some good news for the British economy as labour participation appears to have increased. The unemployment rate rose to 4.5% against a claimant count drop to 28,000 for September, suggesting that more Britons are entering the labour market. Brexit appears to be at the forefront of Euro area currency weakness as Britain’s PM, Boris Johnson, reiterated willingness to implement and some likelihood of a no-deal Brexit. European Union negotiators remain optimistic that some progress can be made, however UK’s chief negotiator, Frost has stated that the door to further talks is open “ajar” and further discussions are pointless without a change in direction from the bloc.
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Weekly Market Review by Anzo Capital
For the week of 19 Oct 2020
The Fall Of Donald Trump?
The final presidential debate was certainly calmer and more civil than the first, as Trump’s Republican party perceived his demeanour in the previous debate as too aggressive. A range of topics were discussed and perhaps the greatest divide between the two candidates was their intended approach with regards the pandemic. Trump advocates for reopening where Biden would endorse further restrictions. Trump attempted several personal attacks on Biden’s private life and family dealings which largely fell flat during the debate. Despite accusations that the Democratic party are “all talk no action;” Trump remains behind in the polls and it seems his performance during debate lacked the real punch required to rock the Biden campaign. Turning to the economy, the labour market appears to be improving, with a significant drop in US citizens claiming unemployment benefits. A total of 787,000 jobless claims were made in the week ending 18th October. Similarly, the U.S. private sector registered another month of growth reaching an almost 2-year high.
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Weekly Market Review by Anzo Capital
For the week of 26 Oct 2020
All Bets On The US Dollar
US GDP figures regained the second quarter losses with a 33.1% surge in output for the first estimate of third quarter performance. The result indicates that a recovery of the US economy is underway, however, further stimulus will be needed to return to the previous pace of growth before the pandemic hit. The labour market appears to be moving in the right direction with fewer jobless claims being filed. Approximately 750,000 Americans claimed unemployment benefits in the week ending 25th October against an estimate of 773,000. Further, capital goods orders also rose more than expected in September as the pace of business investment appears to be gaining pace. Orders growth far exceeded expectations; climbing 1.9% for the month.
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Weekly Market Review by Anzo Capital
For the week of 2 Nov 2020
Biden Claims Victory; Trump Contests
Headlines were swamped with controversy last week, as the Presidential election became a closer run race than anyone was expecting. A number of key states were overturned by both parties, with Presidential candidate Trump calling for a recount of votes and threatening legal action. Despite an agonising wait, Joe Biden was announced as the next President of the United States. Trump is expected to contest the win. The US economy is performing well despite the circumstances; more citizens are returning to the labour market as 638,000 new jobs were added in October. At the same time, the unemployment rate dropped to 6.9%. Both Manufacturing and Services sectors expanded in October. The FOMC meeting offered no surprises in its October committee meeting as current policy remains unchanged.
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Weekly Market Review by Anzo Capital
Reflecting on the week of 9 Nov 2020
Markets Surge On Positive Vaccine Results
Markets received a boost at the start of the week as Pfizer announced 90% effectiveness of their Covid-19 vaccine. The result comes amid a second wave of cases in Europe and further movement restrictions. Although some of the uncertainty surrounding the path to economic recovery seems to be fading, macroeconomic data suggest that a return to pre-pandemic levels is some way away. Economic growth figures in the UK met expectations with rise of 15.5% for the third quarter. However, economic output is still almost 10% less than the same period in 2019.
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Weekly Market Review by Anzo Capital
Reflecting on the week of 16 Nov 2020
U.S. Dollar Struggles To Find Support
Consumer spending in the U.S. pulled back to 0.2% in October. Sales missed expectations and represented a considerable drop when compared with September’s data. The slowdown in spending provides warning signs for fourth quarter economic growth. U.S. citizens are seeing their household incomes shrinking with government employment support coming to an end. Furthermore, labour statistics released for the week ending Sunday 15th November showed 742,000 Americans filed jobless claims.
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Weekly Market Review by Anzo Capital
Reflecting on the week of 23 Nov 2020
Dollar Sell-off Continues
Macroeconomic data coming out of the U.S. is mixed; PMI reports suggest that output has reached a 5-year high as supply chain disruptions have lifted creating a surge in prices. The composite index showed a broad-based expansion of 56.3%. Positive news regarding hiring in the PMI reports was divergent from other labour market statistics. Jobless claims rose against forecasts to 778,000 in the week ending the 22nd November. The FOMC meeting minutes showed some disparity between committee members with regards to applying further stimulus to the economy. Members cited uncertainty in the economic outlook given the backdrop of rising coronavirus cases and the need for qualitative assessments before the implementation of policy changes. Some also raised concerns with regards to a fundamental change in transmission mechanisms of asset purchasing activities, highlighting that a significant rise in such activities could have “unintended consequences.”
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Weekly Market Review by Anzo Capital
Reflecting on the week of 30 Nov 2020
Are China Still Inflating Their Growth Numbers?
Factory output in China reached a 36 month high in November, extending to 52.1% for the month, compared with 51.4% in October. Growth was seen across a broad range of sub sectors, yet, domestic demand remains weak and a likely target for stimulus.
The British Manufacturing industry saw both output and growth climb in November to an almost 3 year high at 55.6%. Both domestic demand and exports contributed to the rise. Across the water in Europe, an extension of current stimulus policies is expected at the next meeting of the European Central Bank. Both the Pandemic Emergency Purchase Program and the Targeted Long-Term Refinancing Operations are expected to be extended by 6 months.
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Weekly Market Review by Anzo Capital
Reflecting on the week of 28 Dec 2020
The Deal Is Done
Despite last week being quiet in terms of macroeconomic data releases, some news resulted in market moves in major currency pairs. The Pound surged on the final agreement on post-Brexit arrangements being signed by government. The rise came despite the reintroduction of movement restrictions as winter season saw Covid-19 and variant cases increasing. Further, the news of the AstraZeneca vaccine being approved for emergency use provided further optimism that the UK may be able to end lockdown strategies by spring.
Facing a similar struggle to control the virus resulted in the U.S. Dollar dropping to a two-year low. Despite a mass vaccination programme being rolled out, President Joe Biden highlighted that it may take years for the vaccine to be distributed, given the current pace. Nonetheless, the prospect of further stimulus and support for households has provided some optimism going into the new year. Employment data was also positive, with almost 20,000 fewer employment claims in the week ending December 27th 2020 taking total claims to 787,000. However, there may be some concern over the spike in first-time applications.
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