Oil leaks. Leaking (“briefing”) the media in a contested takeover is one of the black arts of the takeovers game. It is of course easy to do when you have a compliant and easy business media, all looking for a scoop. And so it was this morning as the advisers to Oil Search and takeover bidder Woodside worked the phones yesterday, telling The Australian Financial Review and The Australian that the meeting of CEOs of Woodside and Oil Search, scheduled for yesterday in Sydney, was off and that Oil Search would reject the offer. Oil Search made sure it did the right thing by telling the ASX first thing this morning to make sure everyone is on the same page. So no paper largesse from Woodside unless it increases its offer from one of its shares for every four Oil Search shares.
What are we also to make of other media reports suggesting that Woodside is in talks with a rival oil company? Well, it can’t be troubled Santos, another shareholder in the PNG LNG project that attracted the bid. So what about the project’s lead partner, ExxonMobil? And what of the attitude of the big shareholders in Oil Search, the PNG government with 10% and an Abu Dhabi sovereign wealth fund with 13%? — Glenn Dyer
Fedwatch alert. The markets are telling us the Fed won’t move this week. Various surveys suggest the futures markets are saying there’s a 24% to 28% chance of a rate rise happening early Thursday morning (our time). Not even the handful of US reporters with their pipelines into the Fed (especially Jon Hilsenrath, the“Fedwire” reporter at The Wall Street Journal), have worked out the inside story. In fact, Fedwire reckons the Fed is split and can’t decide on what to do. The Financial Times told the Fed not to lift rates in an editorial at the weekend and The Economist carried a series of stories highlighting the dilemma and what happened after previous major rate rises. The 1994 increase wreaked havoc, causing a wide range of companies to fail. — Glenn Dyer
And then there’s China. To say last week’s trade and car sales data from China were weak to disappointing would be an understatement. What then of the rest of the major data for August released yesterday afternoon in Beijing and missed by this morning’s local business media? In short, more evidence of weakness. Factory output rose 6.1% last month from August 2014, less than the 6.4% forecast by the market percent expected but up from July’s 6.0% Growth in fixed asset investment slowed further in August – down to 9.2% year on year (from 10.3% previously) — the lowest rate of growth since December 2012. But over the first eight months of the year the 10.9% growth rate was the lowest growth rate for nearly 15. But on the plus side, new lending was stronger in August — almost 13% higher in year-on-year terms. However, it remains down around 10% over the first eight months of 2015 from the same period of 2014. Annual growth in real estate investment continued to slow, falling to a rate of just 3.5% in the eight months to August, down from the 4.3% rate in the January-July period and the lowest rate for more than six years. — Glenn Dyer
Production, imports tell the real story. Demand is flat at best inside China (only rising exports of steel products is keeping the sector ticking over). Crude steel production was up marginally from July at 66.94 million tonnes, but down 3.5% on August of last year. That also saw a 6.6% fall in local coking coal production. Overall raw coal output (including thermal coal), fell 2.6% in July, but natural gas output was up 3% in the first eight months of the year to August as China cuts its thermal coal imports and consumption and tries to cut pollution. But that 3% rise was down sharply on the first eight months of 2014 (up 6.9%) and the same period in 2013 when gas output jumped more than 11%, according to figures from Reuters.
China tried to divert attention from the weak production and investment data by releasing more details on reforming the country’s 155,000 state-owned enterprises. The proposed reforms were first mooted back in 2013, so the timing of yesterday’s release was inspired to say the least, coming almost at the same time as the last major economic data release for August. Global iron ore was steady Friday night at US$59.01 a tonne. — Glenn Dyer