Monday Morning Cheat Sheet: 3 Stories Moving Markets

Markets were mixed in Asia overnight. Japan’s Nikkei index surged 4.94 percent after news broke that first-quarter GDP was upwardly revised. The yen weakened to 98.76 to the dollar. In Hong Kong, the Hang Seng edged up 0.18 percent, while the S&P/ASX 200 fell 0.91 percent in Australia.

Markets were also mixed in Europe in mid-day trading. Germany’s DAX was up 1.08 percent, London’s FTSE 100 was off just 0.04 percent, and the STOXX 50 index was up 0.14 percent.

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U.S. futures at 8:45 a.m.:  DJIA: +0.30%, S&P 500: +0.26%, NASDAQ: +0.23%.

1) Chinese Economic Indicators: A battery of economic indicators for China were released over the weekend. Perhaps most significantly, export growth slowed from 14.7 percent in April to just 1.0 percent in May. The slowdown is the result of a government crackdown on invoicing, a scheme that artificially increased export figures either by outright fraud or by taking advantage of loopholes in the system. Imports contracted 0.3 percent on the year. Both figures were well below consensus analyst estimates.

Meanwhile, retail sales increased 12.9 percent on the year, or 1.17 percent on the month, in line with expectations. Industrial production, an inflation-adjusted gauge of manufacturing output, increased 9.2 percent on the year, also in line with expectations. The producer and consumer price indexes declined 2.9 percent and increased 2.1 percent on the year, respectively. Both figures showed less inflationary pressure than expected.

2) The Decline of Small Business and What to do About It: Americans have long seen small businesses as the heart and soul of their economy, but small firms have not fared well in recent years. Corporations, in contrast, seem to be on a roll, with profits and stock prices soaring to record highs. Is small business really in decline, and if so, what should we do about it? (Read more.)

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3) Japanese Gross Domestic Product: Japanese gross domestic product increased at an upwardly-revised seasonally-adjusted annual rate of 4.1 percent in the first quarter of 2013, according to data released by the nation’s cabinet office. This is better than the 2.8 percent consensus growth estimate, and compares favorably to 1.0 percent SAAR growth in the fourth quarter of 2012.

GDP was up 1.0 percent on the quarter, driven primarily by personal consumption — about 60 percent of Japan’s GDP — which was up an annualized 3.7 percent. On the other side of the coin, capital expenditures (a proxy for business investment) declined 0.3 percent on the quarter. Exports were climbed 3.8 percent on the quarter, while imports were up 1.0 percent. Domestic demand was revised from a gain of 0.5 percent to a gain of 0.6 percent.

Also over the weekend, Prime Minister Shinzo Abe announced a plan to launch corporate-investment tax breaks sometime this fall. The tax breaks will be part of the second stage of an economic initiative announced last week.

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