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Strong Performance From China Carries Over Into US, European Sessions


Today's financial recap and tomorrow's financial outlook.

Any pickup in tensions in Ukraine were dismissed as the German DAX (INDEXDB:DAX) was the top performer in Europe, rising 1.26%. The EU announced sanctions against two Russian companies and 13 individuals due to Russia's continued involvement in the region. In other news, following a referendum vote yesterday to leave Ukraine, the eastern Donetsk region proclaimed itself a sovereign state called the Donetsk People's Republic and asked to be absorbed by the Russian Federation.

Chinese stocks were on fire last night, and that ended up passing through into European and US equities. The Shanghai Composite (SHA:00001) was up 2.08% overnight with more than 90% of its components rising. Copper, iron ore, and energy and materials sectors were all the top performers, gaining in excess of 4%.

The small-cap Russell 2000 (INDEXRUSSELL:RUT) rallied strongly today after two months of underperformance versus the S&P 500 (INDEXSP:.INX). Although all sectors rose today with the exception of interest-rate sensitive utilities and telecom, two of the top performers today were the financial and tech sectors. Cloud stocks such as Workday (NYSE:WDAY), Tableau Software (NYSE:DATA), Netsuite (NYSE:N), and ServiceNow (NYSE:NOW) all formed technical double bottoms and exploded higher in today's session. Most of these stocks have lost as much as 50% in the past two months. Twitter (NYSE:TWTR) also continued its rise following last Tuesday's lockup expiration. In the financial sector, all 24 components of the KBW Bank Index (INDEXSP:BKX) gained.

Tomorrow's Financial Outlook

Tomorrow morning we'll receive advance retail sales from April, the first significant piece of economic data from the month that we'll see reported this week. Economists expect sales to rise 0.4% in April after rising 1.1% in the month prior. Core sales, excluding automobile and gasoline sales, are expected to rise 0.5%. April import and export prices are also scheduled to be released in addition to the very final piece of first-quarter GDP, private inventories for March.

The key catalyst for risk assets overnight will be the release of April Chinese retail sales, industrial production, and fixed asset investment. Manufacturing surveys in the month were very tepid, and investors will be looking for continued upside acceleration after activity appears to have bottomed at the end of last year. A minor decline is probably the worst-case scenario because it might not spur the government into action.

There are no major earnings reports scheduled for tomorrow.

Twitter: @Minyanville

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