The world is adjusting to the reality of Brexit. The good news is that world equity markets have stabilized and in some cases have rallied. That does not mean, however, that the potential fallout has been contained. Global government bond yields have dropped, the Sterling continued to plumb new depths and UK consumer confidence experienced the largest decline in 21 years. And the possibility of additional EU political contamination continues. 

Over the last 2 weeks, Markit Economics released their latest manufacturing and service PMI numbers for China. Manufacturing continues to contract, with the PMI falling from 49.2 to 48.6. A drop in new work and production was responsible for the decline.  More importantly, employment reached a 32 month low. Service activity, however, increased; the PMI rose from 51.2 to 52.7, largely as a result of increased new orders.

On Monday, Australia maintained interest rates at 1.75%. Their statement contained the following assessment of the Australian economy:

In Australia, recent data suggest overall growth is continuing, despite a very large decline in business investment. Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend. Labour market indicators have been more mixed of late, but are consistent with a modest pace of expansion in employment in the near term.

The latest Australian GDP report showed annual growth of 3.1% while the unemployment rate has been 5.7% for the last 3 months.  The most recent retail sales release reported a 3.3% Y/Y growth rate. Business investment has declined sharply, largely due to a number of very large natural resource projects being completed with no new projects being developed.  However, other areas of the economy have more than made up for the slowdown in business investments. 

Japanese news was negative. While the manufacturing PMI rose, it's still at a negative 48.1, below the 50 level that delineates expansion and contraction. The rising yen, which is negatively impacting export orders, caused the drop.  he service sector isn't much better, with the headline PMI dropping from 50.4 to 49.4, indicating the service sector, like manufacturing, is contracting.  Weak export orders, largely caused by the strong yen, were the primary reason for the decline.