Anzo Capital: Weekly Market Review

Anzo Capital

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Weekly Market Review by Anzo Capital
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.
 

Anzo Capital

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Weekly Market Review by Anzo Capital
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.
 

Anzo Capital

Anzo Capital Representative
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Weekly Market Review by Anzo Capital
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.
 

Anzo Capital

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Weekly Market Review by Anzo Capital
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.
 

Anzo Capital

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Weekly Market Review by Anzo Capital
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.
 

Anzo Capital

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Weekly Market Review by Anzo Capital
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.
 

Anzo Capital

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Weekly Market Review by Anzo Capital
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.
 
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