Oil bites, deeper, really. Forget the sharemarket, share prices and the chat over gloom and doom from China; watch oil prices. If you want a canary for the current bout of global woe, it’s the prices of Brent and US West Texas (WTI) style crude oils — they are screeching “alert, alert, alert”. No talk of bonuses for consumers and economies, just a realisation that the slide is going to hurt for a while yet. Last week’s 10%-plus slide for both so-called marker crudes was a shock start to the new year — yesterday, the sixth trading day of the year, brought a fall of 6% and more in just a few hours trading. (And not one analyst saw either coming, so rapid was the change.) US oil futures settled under US$32 a barrel on Monday for the first time since December 2003, down 6.8% at US$31.11 a barrel after a late sell-off. Brent crude in London fell 6% to US$31.55, and Morgan Stanley forecast it was on the way to US$20 a barrel. If that happens briefly it will hurt, but won’t destabilise. If it falls lower and that’s sustained, watch for another round of pain, losses, investment cuts and worse for energy companies the world over. — Glenn Dyer

US coal collapse redux. Arch Coal, America’s second biggest miner, filed for bankruptcy overnight after doing a deal with major creditors for a Chapter 11 restructuring that will help it avoid the growing cost of US$4.5 billion in debt, falling sales and nonexistent cash flow. It became the fourth major US coal miner to collapse and restructure itself (fruitlessly?) in the past year — rivals Patriot Coal Corp. Alpha Natural Resources Inc and Walter Energy all filed for bankruptcy protection in 2015. In fact, industry leader Peabody Energy (a big miner in Australia and an even bigger supporter for coal and a rampant climate change denier) is the only major US coal company not to have collapsed in the past year or so, but more and more US analysts reckon it is only a matter of time. Falling demand for coal from the power industry because of slumping gas prices and weak export demand in Europe caused US coal production to plunge to a 30-year low last year of around 900 million tonnes, according to a report on Friday from the US main energy forecaster, the Energy Information Administration (EIA). That figure is a third lower than the record 1.2 billion tonnes in 2008 and down 10% from 2014’s figure of just on 1 billion tonnes. — Glenn Dyer

Davos to save Switzerland? The annual Davos talkfest is on in Switzerland next week — and the thousands of foreign business bigwigs and wigettes will be welcome visitors, perhaps even saviours, to a country where the rising Swiss franc and lack of snow is ravaging the economy. Retail sales dropped by a painful 2.1%, year on year, in November (ours were up 4.1%), a worsening from the 1.1% slide seen in October and the fourth month of declines. Car sales are weak, as are exports, growth is barely happening and the lack of snow has meant a sharp fall in business for ski resorts, airlines, and other businesses that feed off the sector. Not helping was the decision a year ago this week by the Swiss National Bank (the country’s central bank) to abandon its defence of the franc against the euro and let the currency float — as a result it has become 10% more expensive to shop in and visit the country. But that decision by the central bank has also taken a toll on it. Preliminary figures for 2015 issued at the weekend show the bank had a loss last year of 23 billion francs (or US$23 billion), including a US$4 billion whack to the value of its gold holdings. — Glenn Dyer

iSelect, iFail. It is one of the more annoying advertisers on TV — the smarmy bloke showing us how we haven’t got the best healthcare and other packages. But for the second time in a month, that approach in financial terms has been shown to be none too clever, with an earnings downgrade that would make the Dick Smith board blush. Yesterday iSelect cut its earnings guidance by 39%, thanks to rising staff costs. And guess what, investors followed that guidance by marking down the company’s shares by 39%. How about that! It was only in early December that US private equity group Providence Equity Partners walked away from a bid for iSelect. And with a new CEO in tow and one of those now familiar “kitchen sink” reviews, yesterday’s earnings downgrade emerged. The shares fell 11% on the day of the December announcement and closed Monday at 67 cents after the big sell-off (50% all told). So what’s the next option? Providence Equity Partners certainly made the right decision to walk away a month ago. — Glenn Dyer

Peter Fray

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Peter Fray
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