The news shaping the markets today

Russia’s military escalated its attack with barrages of heavy artillery to capture the Donbas city in Ukraine. The news sent crude oil prices higher this morning.

Iran’s annual inflation rate accelerated to 39.3% in May, from 35.6% a month ago, hitting the highest rate since last September. However, the IRR/USD forex pair remained flat after the news.

Qatar’s trade surplus widened to QAR 34.2 billion in April, from QAR 12.8 billion in the year-ago period. Despite this being the largest trade surplus since March 2014, the QAR/USD pair remained flat in forex trading this morning.

Vietnam’s retail sales surged 22.6% year-over-year in May, following a 12.1% increase in the previous month. The recent reading pointed towards the steepest growth since July 2015, lending support to the VND/USD forex pair.

Canada’s government budget deficit shrank to CA$25.8 billion in March, from CA$31.4 billion in the year-ago month, sending the CAD/USD pair higher in forex trading this morning.

What’s happening: Shares of Pinduoduo climbed on Friday, after the company reported stronger-than-expected results for its first quarter.

What happened: Pinduoduo recorded upbeat results in the first quarter, with more people shopping online due to the resurgence of covid-19 infections in China.

The company warned, however, of a slowdown in growth in the ongoing quarter.

How were the results: The Chinese company swung to a profit in the quarter ended March 31, with both top- and bottom-line metrics exceeding market expectations.

• Sales grew 7% year-over-year to $3.7 billion, exceeding market views of around $3.1 billion.
• Net income came in at 2.6 billion yuan, versus a loss of 2.91 billion yuan in the year-earlier quarter.
• Adjusted earnings came in at 47 cents per share of its American Depositary Shares (ADS), versus a year-ago loss of $1.52 per ADS, also beating the consensus estimate of 25 cents per ADS.

Why it matters: Pinduoduo ranks third among the biggest ecommerce platforms in China in terms of gross merchandise volumes, with Alibaba Group and JD.com leading the list.

With China following a strict zero-covid policy, millions of people were forced to follow stringent lockdown restrictions. The government’s uncompromising measures also impacted movement of goods in the country, which weighed on the first-quarter results of several ecommerce companies.

Pinduoduo’s average monthly active users rose 4% year-over-year to 751.3 million, while active buyers rose 7% to 881.9 million in the twelve months to March 31.

The company’s revenues from online marketing services and other businesses climbed 29% year-over-year to $2.86 billion, while revenues from transaction services surged 91% to $882 million. However, revenues from merchandise sales dipped 99% from a year earlier to $6.9 million.

CEO Chen Lei said during the earnings call that the company was as “going through an adjustment” of their development strategy “to focus more on technology and agriculture in order to pursue long-term, high-quality growth.” He added that the company’s growth rate could be impacted by this strategy.

How shares responded: Pinduoduo’s US-listed shares jumped 15.2% to close at $48.30 on Friday, following the release of quarterly results. The stock has tumbled around 24% year to date.

What to watch: Investors will continue monitoring covid-19 restrictions in China as well as the supply chain issues that ecommerce giants are currently facing.

The markets today

European stocks will be in focus today ahead of a basket of economic reports from the common bloc

Context: European stock markets settled higher on Friday, also recording gains for the week.

Details: Markets in Europe recorded gains on Thursday, after UK Finance Minister Rishi Sunak announced a £7 billion cost-of-living package. “That means we are supporting families with the cost of living with £37 billion, or one and a half percent of GDP,” Sunak added.

The World Economic Forum also ended on Thursday in Davos, Switzerland, where several of the world’s leading politicians and businessmen gathered to discuss global economic issues.

The pan-European Stoxx 600 gained 1.42% to close at 443.93 on Friday, with technology stocks leading the rally, gaining more than 3%. Most sectors also closed in positive territory on Friday. The Stoxx 600 added around 3% last week, with some recovery in overall investor risk appetite.

London’s FTSE 100 rose 0.27% to close at $7,585.46, while Germany’s DAX 40 and the French CAC 40 added 1.62% and 1.64%, respectively.

What to watch: Traders await the release of economic data on economic sentiment, industrial confidence and consumer confidence from the Eurozone today. The Eurozone’s economic sentiment indicator, which declined for a second straight month to 105 in April, is expected to decline further to 104.9 in May. The industrial confidence indicator is projected to decline to 7.5 in May, from 7.9 in April. Analysts expect the consumer confidence indicator to add 0.9 points to reach -21.1 in May.

Markets will also keep an eye on the ongoing Ukraine war and rising covid-19 cases in some parts of the world.

Other Markets: US indices closed higher on Friday, with the Dow Jones, S&P 500 and Nasdaq 100 up by 1.76%, 2.47% and 3.30%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s import prices and inflation rate, Spain’s consumer prices and industrial confidence indicator, Italy’s producer prices, Eurozone’s selling price expectations, services confidence indicator, consumer confidence price trends over next 12 months and European Council meeting, Canada’s current account, as well as Brazil’s net payrolls and Central Bank of Brazil’s focus market readout.