Burning the Friday night oil. It’s the final round in the home and away series of the AFL and the NRL (not to mention another stage in the Tour of Spain), so there will be a few sports fans veging out tonight. But stay up until 10.30pm and take a look at the US jobs report for August. You won’t be alone. Millions of people around the world will be doing just that in financial markets, trading rooms, broking houses and at home. It’s a bigger deal than normal (the monthly jobs report are the most-watched economic figures around the world). It will be a hesitant day of trading on markets in Asia and for the start in Europe while they await the August jobs report. — Glenn Dyer
Economically confused. Let’s see, if retail sales rose 4.2% in the year to July, wages rose around 2.3% (in real terms) in the year to June, inflation was 1.7% (headline), 2.25% (underlying), and there is supposed to be a retailing crisis. Oh, car sales in the eight months to August were up 3.2% on the same period of 2014. So that 0.1% seasonally adjusted rise in July retail sales was the end of retailing and household consumption as we know it, as so many media and analyst reports suggested yesterday and this morning? Spare me days. It is more in line with the slow/sluggish growth that is gripping the Australian economy, and other economies around the world. The reporting missed the August car sales, released yesterday by the industry. They were more than 90,000, and car sales are heading to go well past 1.1 million units by the end of December. Car sales are not included in retail sales in Australia, as they are in the US. After homes, cars are a major purchase, and a sign of confidence among consumers. So the national accounts show the terms of trade collapsed, dragging national income lower now for the past five quarters (down 5%), and yet retail sales are running well ahead of inflation and incomes. The savings rate was 8.8% in the quarter, seasonally adjusted (8.6% on a trend basis), down from more than 9.4% a year ago, so consumers are using up some of their savings. Hmmm. One quarter a recession does not make. — Glenn Dyer
Glencore warned. Some US$30 billion in debt gets you no respect from ratings groups, brokers and nervous banks, even if you are Glencore International. Standard & Poor’s overnight cut Glencore’s outlook from stable to negative — usually a precursor for a cut in the actual rating.It has been a parade of banks and brokers hacking away from Glencore’s credit and investment ratings in 2015 — all backed by a falling share price, now 60% under the float price back in 2011. All this underlines how lucky shareholders, Australian taxpayers and workers were when Rio Tinto’s management and board told Glencore to take a walk when it tried to snuggle up to Rio in an agreed bid last year. Such a move would have crippled Rio’s financial strength (especially as iron ore prices tanked) and bolstered that of Glencore (which has worsened noticeably a year when it first tried its hug). Overnight S&P warned Glencore: “A sizeable acquisition could also be a trigger for a downgrade.” So no move to buy Rio, or its Australian coal business, which is on the market to those with the right sort of cash. Its debt pile is higher than Rio’s or BHP, and it has a spread of interest that are all falling and in oversupply. And not even its fabled trading business can stave off the wolves. — Glenn Dyer
No Joy in coal. Joy Global is key supplier to the global mining industry — especially coal with its suite of long-wall and continuous mining equipment and other products. It’s a major operator in Australia and the US, and it is very, very gloomy about coal. The company overnight released its latest quarterly figures, cut revenue and profit estimates (again) and the shares plunged 14% and are down more than 50% over the past year. It expects global coal prices to continue to fall, and says coking coal prices are now around US$85 a tonne after settling at US$93 a tonne in the June quarter. That’s bad news for BHP Billiton. And more worrying is its outlook for thermal coal, especially in the US, where surging gas production from shale fields (prices are below US$3 a million British Thermal Units). Joy says this weakness in gas prices is seeing soaring consumption, especially in the power industry. So much so that US coal production will fall by 80 million to 90 million tonnes this year, or as much as 10%, which is more than anyone has forecast. That’s more bad news for struggling coal companies such as Arch and Peabody (which has big operations in Australia). Globally, Chinese coal imports are now running 100 million tonnes a year lower than in 2014. So more bad news for the Australian industry (including Peabody). Anyone for an Indian coal mine in Queensland? Watch for more collapses in the US coal industry. — Glenn Dyer
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