Australian growth below expectations

<p>Australia’s economy shrank in the first quarter by the most in 20 years as floods hurt exports, even as stronger business investment underscored the central […]</p>

Australia’s economy shrank in the first quarter by the most in 20 years as floods hurt exports, even as stronger business investment underscored the central bank’s forecast for a rebound in the second half of the year. Gross domestic product fell 1.2% from the previous three months, when it rose a revised 0.8%, the Bureau of Statistics said in Sydney today. Exports slumped 8.7%, subtracting 2.1% points from GDP growth, today’s report showed, while machinery and equipment spending jumped 6%, adding 0.4 point.

Elsewhere in the region, China’s manufacturing expanded at the slowest pace in nine months in May as the government extended a campaign to cool inflation and the property market,
a survey of companies indicated. The Purchasing Managers Index was at 52 from 52.9 in
April, the China Federation of Logistics and Purchasing said in an emailed statement. The Shanghai Composite Index has fallen by more than 10% from this year’s high in April, and analysts have pared economic growth forecasts as monetary tightening starts to bite. The benchmark slid another 0.5% in early morning trade, while the yuan was little changed.

The MSCI Asia Pacific Index gained 0.4% to 136.82 in early afternoon trade, with about six stocks rising for every five that fell. The 1,016-company gauge last week completed its longest streak of weekly losses in two years as concern deepened over Europe’s debt crisis and amid speculation a slowing global recovery will crimp earnings. Australia’s S&P/ASX 200 Index gained 0.3%, Japan’s Nikkei 225 Stock Average increased 0.3% and South Korea’s Kospi Index added 0.1%. Taiwan’s Taiex Index climbed 0.9%.

In corporate news, Fortescue metals will today release plans to fast track its production towards 155mtpa by up to 12 months. The announcement follows Andrew Forrest’s decision to shift from the CEO to Chairman’s role – a decision we think is unlikely to change market perceptions. FMG remains a pure play iron ore stock, leveraged to the iron ore price and Chinese growth story. As long as production targets are achieved and cost rises contained, the stock should find plenty of support in the market.

In Singapore, GP Batteries International, a maker of rechargeable batteries, climbed 2.6% to S$1.20. The company said a unit bought 1.53 million additional shares in Danionics A/S for S$1 million ($813,471), raising its stake in the Danish battery maker to 17.3% from 9.1%. Otto Marine Ltd. (OTML SP), a Singapore-based shipbuilder, declined 2.3% to 21 Singapore cents.

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