Anzo Capital: Weekly Market Review

[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 25 Jan 2021

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U.S. Dollar Is Still Under Pressure​

Demand for ‘Made in the U.S.A’ goods appear to be healthy. Core Durable Goods orders rose for the eighth consecutive month to 0.7% in December. A more tempered rate of economic growth was achieved in the fourth quarter of 2020, which saw a 4% rise in output, compared with a 33.5% rebound in the third quarter. Output is now estimated to be only 2.5% off the rate of growth seen before the Covid-19 outbreak. The labour market also looks to be showing improvement with 847,000 jobless claims for the week ending 24th January; 33,000 less than forecast. Unsurprisingly, there were no changes to monetary policy from the Federal Reserve at the January committee meeting.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 1 Feb 2021

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Asia Recovery Is Slowing Down​

According to the Caixin manufacturing PMI survey, growth in China’s services sector slowed at the start of the year, with business activity weakening at the fastest pace in 9 months. Fewer exports sales and falling consumer demand have been blamed for the slowing output. Japan’s Au Jibun manufacturing report indicated that the sector has moved into contraction in January. The reduction in production has been a persistent problem however, new ‘state of emergency’ restrictions implemented by trading partners have resulted in the sector’s pullback. An output of 49.8% has been registered for the month.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 15 Feb 2021

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A Change In Fortunes For The U.S. Dollar?​

Unemployment claims in the US unexpectedly rose last week with 861,000 applications for jobless support registered. The spike comes after a few weeks of declining claims, underscoring the scale of economic dislocation. Retail sales offered a glimmer of hope for the economy, rising for the first time in three months and representing a 7-month high at 5.3%. However, the spike in sales has been attributed to the issuance of stimulus checks. According to the HIS Markit report, output in the U.S. accelerated at the fastest pace in 6 years in February. The rise has been attributed to climbing domestic demand and rising new orders for the Manufacturing sector.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 22 Feb 2021

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The Pound Is Winning The Vaccine Race​

The Pound has established the most sustained rally that the currency has seen in 5 years. Optimism for a faster recovery has buoyed Sterling rates as the vaccine rollout has seen 20 million Britons already receiving the vaccine to date. The UK has also seen a second monthly rise in payrolls, as 83,000 new jobs were filled in January 2021. Fears of inflationary pressures were squashed by Bank of England Governor Bailey at The Monetary Policy Report Hearings last week. Despite a rise in household savings during lockdown and a potential for a spike in demand as restrictions are soon lifted, the committee believes the price stability mandate of 2% will remain intact. The positive sentiment also spanned to Europe. The German Ifo Business Climate index reached a peak not seen since last October, as the industrial output continues to support Europe’s largest economy despite confinement measures.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 1 Mar 2021

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Time To Buy The US Dollar?​

Triumph for the U.S labour market came in the form of better-than-expected payroll numbers for February. A total of 379,000 new jobs were added to the economy for the month against a forecast of 197,000. Additionally, the unemployment rate moved lower to 6.2%. Manufacturing and Services sectors showed signs of strengthening, if perhaps, at a slower pace than expected at this stage. Growth cooled slightly for the Manufacturing sector in February at 58.6% however, this represented the second fastest spike in growth since April 2010. The Services sector saw its ninth consecutive month of growth at 55.3% yet the data indicates a significant fall in pace of output due to supply bottlenecks.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 8 Mar 2021

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Everything You Need To Know About The Markets Right Now​

The ECB, unsurprisingly, made no material changes to current monetary policy. The bank did commit to ramping up the pace of their Pandemic Emergency Purchase Programme yet overall, the size of bond purchasing will remain the same. The policy stance has always been non-exchange rate targeting and the ECB kept to that commitment, as the latest move is not expected to dampen support for the Eurodollar.

Annualized inflation is moving closer to the Fed’s price stability mandate of 2%. In the 12 months to February, consumer prices climbed 1.7%. A surge in energy prices contributed the most to the rise in the index, however, consumer-related services continue to suffer from a lack of demand. The result marks a steady recovery, highlighting that growth in the world’s third largest economy continues to be asymmetric. The approval of Biden’s $1.9 trillion fiscal stimulus package should stoke consumer demand and that, coupled with a ramp up in the vaccination programme, should result in a more rapid economic recovery.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 15 Mar 2021

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Dollar Falls As Hopes Dashed​

The Fed maintained an ultra-dovish tone at its latest monetary policy meeting, indicating that rates are unlikely to rise until 2023. Market participants were preparing for a tightening of policy given signs of a faster than expected economic recovery. Despite this, the Fed removed an emergency support measure provided to the banks during the crisis, called the supplementary leverage ratio, which established lower capital requirements. The move is not expected to impact the Treasury market according to Fed officials. Retail sales plummeted 3% in February after climbing almost 8% in the previous month. The fall was unexpected and driven by unusually bad weather, with sales expected to recover in March as a new round of stimulus checks is released by the government.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 22 Mar 2021

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Is It A Good Time To Buy The Euro?​

A spate of poor macroeconomic data hit the UK last week. CPI data showed that prices rose 0.4% in the 12 months to February 2021, representing a decline from 0.7% in January as consumer products led the decline. Labour market figures indicated that almost 87,000 new claimants filed for unemployment benefits in February, yet, the unemployment rate lowered to 5% during the period. Retail sales made a partial recovery, registering 2.1% growth for February, after contracting 8.2% in January. Recovery in the Eurozone accelerated in March with PMI data indicating multi-month highs for both the Services and Manufacturing sectors.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 29 Mar 2021

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Biden Rescue Plan: Bad News Stocks?​

The first stages of recovery are underway in the U.S., as employment data suggests the better weather and widescale vaccination programme has led to increased optimism from businesses. A total of 916,000 new jobs were created in March; the strongest pace of hiring since August. President Biden set out his long-awaited stimulus plan which would see the government spend $2 trillion over the course of the next 8 years. The plan includes an overhaul of current infrastructure for roads, broadband, water systems and housing. The president-elect estimates with a newly implemented 28% corporate tax rate, the stimulus spending will be recovered in 15 years.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 5 Apr 2021

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Covid-19 Spike Slows The US Recovery​

Fed Chairman Powell reiterated his concerns about a recovery, in light of the recent rise in Covid-19 infections. He declared that the virus represents more of a concern for the committee than any potential inflationary pressures. If citizens decline vaccinations, another outbreak could curtail an already fragile recovery despite huge stimulus and support from both the Fed and the government. Minutes from the latest FOMC meeting affirmed that no change in policy would take place until ‘substantial further progress’ has been made in key indicators such as employment and inflation. Initial jobless claims spiked unexpectedly to 744,000 in the week ending 3rd April, as unemployment remains markedly above pre pandemic levels.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 12 Apr 2021

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U.S. Dollar Set To Skyrocket?​

U.S. inflation surprised to the upside, with annualised inflation climbing to 2.6% with a month-on-month rise of 0.6%. The rise has been attributed to the gradual opening of the economy in which demand has been fuelled by the recent stimulus cheques. The current pace of price increases could see the Fed implementing tighter monetary policy sooner than expected. Improving employment conditions and government support saw retail sales skyrocket during March to 9.8%. The result indicates that momentum is gathering in the US economy and points to strong economic growth going into the second quarter.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 19 Apr 2021

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A Weak Yen Is A Double-Edged Sword​

Japan exports climbed by double digits for the first time since 2018 with a year-on-year rise of 16.1% in March as a weaker Yen stimulated demand. Exports were led by car manufacturers, plastics and ferrous metals. The good news came against a backdrop of vaccination delays and rising coronavirus cases. Early data from the Jibun Bank Flash Japan Composite PMI report suggests output moved out of contraction in April, driven largely by growth in the manufacturing sector. The result should propel the economy going into the second quarter, so long as the COVID-19 situation can be contained.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 26 Apr 2021

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US GDP: Sharpest Rise In Almost 40 years​

The U.S. economy fared much better in terms of growth than its European counterpart. GDP registered a 6.4% pace of growth which was slightly lower than forecast but represented the fastest rate of first quarter growth since 1984. Labour market statistics continue to show an encouraging trend, as fewer new claims for unemployment support were filed in the week ending 25th April. A total of 553,000 new filings were made, which is a decline towards levels not seen since March 2020. Federal Reserve Chairman, Powell, avoided talk of tapering current stimulus; reiterating that continuous improvements would need to be seen, primarily in labour markets. Forecasts suggest that inflation may overshoot the target rate, yet the Fed has attributed this to base effects and bottlenecks, which it considers temporary.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 3 May 2021

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A Big Shock For The US​

The shock of the week came from the Non-Farm Payroll report, which registered just 266,000 new jobs in April, against a forecast of 990,000. Additionally, the last two months' payroll figures were revised downward. Unemployment also ticked slightly higher at 6.1%. The data comes in contrast to expectations of a speedy recovery for the US economy and highlights residual weakness. A slowdown was also recorded in both the Manufacturing and Services sectors, although both have registered 11 consecutive months of growth. The slowdown has been attributed to adverse weather conditions, material shortages and logistical challenges affecting deliveries.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 10 May 2021

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Everything You Need To Know About The Markets Right Now​

A series of macroeconomic data suggests that the US economy may not be forming the sharp recovery that initial economic signals implied. US core retail sales data indicated that output for the world’s largest economy may be slowing during the second quarter. Sales contracted by 0.8% in April. CPI figures surged 0.9% in April against a forecast of 0.3% indicating that inflationary pressures are rising. US unemployment claims continue to head in the right direction, trending lower to 473,000 claims for the week ending 8th May.

The reintroduction of coronavirus restrictions resulted in the UK economy contracting by 1.5% in the first quarter of 2021. The largest drag on growth came from the retail sector as well as services and construction. The UK economy is estimated to be 8.7% below pre-pandemic growth levels.

China CPI data suggests prices have been more subdued in April at 0.9% year-on-year growth, partly due to higher-than-normal pork prices last year. The base effects are expected to last until the remaining quarter of the year and despite moderate demand, price growth is set to remain modest.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 17 May 2021

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U.S. Dollar Under Pressure​

U.S. private sector output reached another record high in May with a 68.1% expansion. The growth was led by the Services sector which registered an eyewatering growth rate of 70.1%. A spike in demand due to reopening of the economy and consumer confidence drove growth during the month. One area of concern for the economy remains the labour market, as labour shortages continue to dampen growth. Jobless claims dropped in the week ending 15th May to 444,000 new claimants, as the number of Americans seeking jobless support trends lower. The release of the Fed minutes last week caused a stir in the markets with the Dollar sinking lower at the prospect of an earlier than expected wind-down of central bank stimulus. Given the rapid expansion in the economy and uptick in inflation figures, the Fed is now open to the idea of a tightening in monetary policy in response.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 24 May 2021

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Round Up Of The Key Market Events​

German managers appear to be more optimistic about economic conditions, as the May Ifo Business climate report showed a rise to 99.2 points in May. The rise represents the largest climbed since May 2019. German economic growth contracted by 1.8% for the first quarter of 2021 as the economy was still grappling with the Covid-19 outbreak.

U.S. short-term consumer confidence took a dip in May, as weakness in the labour market highlights potential income issues for Americans in the coming months, as government support begins to wane. Despite the concerns, the labour market moved closer to pre-pandemic levels last week with jobless claims reaching 406,000 for the week ending May 22nd. The final GDP reading remained unchanged at 6.4% for the first quarter despite expectations for an upward revision. Core capital goods orders rose 2.3% in April, with a year-on-year spike of 14.7%.

Consumer prices continue to contract in Japan as the Tokyo CPI registered -0.2% year-on-year price change in May. Prices remain well below the bank’s price stability mandate of 2% annualized inflation. The drop comes amidst further woes in the labour market, with job scarcity resulting in the unemployment rate ticking upwards to 2.8% in April. Further stimulus may be required to boost the economy.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 31 May 2021

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NFP Disappoints; USD Lacks Support​

U.S. labour market continues to make a slow recovery as, once again, payroll numbers fall below expectations. The Non-Farm Payroll report last week showed that a total of 559,000 new jobs were created in May, well below expectations of 671,000 in job creation. Labour market participation also edged lower to 61.6% indicating that falling numbers of jobless claims may be a result of workers halting their job search. Clearly, the pace of new hiring will take longer than originally forecast. The services sector has received a boost from stimulus cheques and facilitation of the vaccination programme, registering 64% growth in May. Interestingly, labour shortages and supply chain issues persist despite reopening, specifically in the Food and Beverage and Accommodation subsector.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 7 Jun 2021

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US Cost Of Living Hits 13 Year High​

The cost of living for US citizens jumped for the fourth month in a row, taking the annualized rate to a 13 year high of 5%. The soaring prices are largely attributable to the reopening of the economy and ‘base effects’ which refer to a much lower comparison in the previous year, as a result of the pandemic, making the reading look more substantial than is indicated by current economic conditions. The Fed has warned that the inflationary effects are temporary and should normalise as the recovery continues.

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[Anzo Capital]

Weekly Market Review by Anzo Capital​

Reflecting on the week of 14 Jun 2021

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US Dollar Is Back In The Game​

US retail sales dropped 1.3% in May due to a shift in spending behaviours as the vaccination programme progresses and citizens move away from major online purchases to family visits. Consumer spending has jumped 28.1% year-on-year in a sign that consumption is beginning to pick up as the economy reopens. As many predicted, the Fed is contemplating raising interest rates earlier than originally projected. A total of 13 of the 18 committee members expect to see at least two rate hikes by the close of 2023. The change is driven by the acknowledgment from Chairman Powell that ‘inflation could turn out higher and more persistent than we expect.’ He did state that more data reflecting ‘substantial progress’ in the economy would be required to support a taper in asset purchases.

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