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.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.