Economy

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Australia delivered a trade surplus for the sixteenth month in a row. Australia's a trade surplus was however lower than expected as signaled by the weaker than expected GDP with drought and mining affects.

Australian first quarter GDP was reported at 0.4% q/q lower than the expected 0.5% q/q but higher than the prior 0.2%. For the y/y 1.8% as expected 1.8% but lower than prior 2.3%. Government spending and exports the main sources for growth.

Manufacturing in the US contracted more than expected in May as measured by the ISM and by Markit. Output was off as prices paid rose giving an earlier indication of the tariff affect.

The UK manufacturing sector in May had a much larger downturn than expected, much of it to do with the March spike to 55.1 vs 51.2 expected boosted by stock purchases ahead of Brexit hitting a G-7 record. UK exports were also at their lowest in almost 5 years.

The Nikkei Japan Manufacturing PMI® in May showed output was reduced for a fifth successive month as demand from both domestic and overseas markets fell. Cusiness outlook turned pessimistic for the first time in six-and-a-half years.

China official PMI data for May showed manufacturing new orders contract for the first time in four months as overseas sales declined for the twelfth straight month. China saw relatively fast growth momentum in the service sector.

Fitch expect 2019 Australian GDP growth of 2.0%, lowest since 2008-2009 global financial crisis. Last October the rating agency affirmed Australia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'AAA' with a stable outlook as did S&P Global Ratings from 'negative'.

The trade war and falling energy prices unintended consequences continue. The Dallas Fed Manufacturing index for May slid negative to -5.3 from expected +5.8, the lowest since December. Worrisome is new orders crashed 75% to +2.4 from +9.8 prior.

Danish shipping giant A.P. Møller – Mærsk A/S released first quarter of 2019 with a 33% increase in EBITDA earnings to $1.2 billion but said still facing considerable uncertainties from weaker macro numbers and the risk from trade tensions and implementation of IMO 2020.

US existing home sales tumbled to 5.19M v 5.35M expected and the prior 5.21M, down -0.4% v +2.7% expected. Mortgage data has been volatile but stronger in 2019 so perhaps housing numbers pick up in the coming months if the geopolitical temperature cools. 

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