Anzo Capital: Weekly Market Review

Anzo Capital

Anzo Capital Representative
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 hope on over to our daily insights page.

Stay tuned!


Anzo Capital
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Weekly Market Review by Anzo Capital

For the week of 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.
Weekly Market Review by Anzo Capital

For the week of 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.
Weekly Market Review by Anzo Capital

For the week of 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.
Weekly Market Review by Anzo Capital

For the week of 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.
Weekly Market Review by Anzo Capital

For the week of 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.
Weekly Market Review by Anzo Capital

For the week of 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.
Weekly Market Review by Anzo Capital

For the week of 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
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.
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Weekly Market Review by Anzo Capital
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.