Finimize - 🦘 Australia has energy

What’s going on here?

The US job market stuck to its traditional, hardy stance on unemployment, according to data out on Friday.

What does this mean?

Jobs data might not sound like a blast, but the figures often influence monetary policy and, in turn, the stock market. In other words, they're attention grabbers. This time around, the US filled more jobs than expected in November but managed to keep average wages just 4% higher than the same time last year. That’s important: increasing wages pull inflation up with them, so a mild reading could encourage the Federal Reserve (the Fed) to let up on interest rate hikes. Or it would, if unemployment figures hadn’t dampened the mood. A shrinking number of jobseekers between October and November means wages could still move up in the coming months, as companies compete to nab the best talent for a price.

Why should I care?

For markets: Japan and the US are oceans apart.

Tokyo’s a long way west of Washington, both physically and metaphorically. See, while the Fed seems to be preparing to cut rates next year, the Bank of Japan is only just considering raising them for the first time since before the 2008 financial crisis. The potential of higher rates has pulled the yen up a notch, saving it from the nearly 30-year low it sunk to against the dollar earlier this year.

The bigger picture: The gloves are off.

Wall Street has a saying: “You don’t fight the Fed”. And throughout the low-interest-rate years, that meant trusting in stocks above all else. But now that rates have been hiked high, investors would be expected to do the opposite. Nope: they’ve been ignoring that adage and piling into US stocks. That’s mainly because they doubt the Fed’s assertion that it’s ready to hike again. But if they’re wrong to ignore the central bank’s word, investors’ portfolios might be hit with a right hook.

What’s going on here?

Woodside Energy and Santos, two of Australia’s biggest oil and gas companies, started talks that could see them celebrating a $52 billion merger.

What does this mean?

Woodside and Santos aren’t small fry by any means. In fact, together they control most of Australia’s natural gas industry. But the sector’s only getting more competitive, plus the cost of taking on new projects is creeping higher. So by joining forces, the duo could combine their cash, spread out their risk, and work on troubleshooting their less successful projects. But they won’t be taking over the world anytime soon: Woodside and Santos combined would still be selling roughly three times less liquified natural gas than big shots like Shell.

Why should I care?

For markets: Yoga isn’t the only way to stay flexible.

Russia’s war in Ukraine shuttered essential gas pipelines and forced Europe to compete with Asia for new suppliers. That sounds sweet for gas providers, but with so many potential markets at their hands, firms need a champion statistician to decide which cargo to send where to bring in the highest possible profit. Or failing that, they can merge with other companies to widen their portfolios, letting them move their supplies around without ditching customers.

Zooming out: The benefits of group mentality.

Mergers are run of the mill in the energy sector. US titan ExxonMobil recently spent $64 billion on Pioneer, for example, and Chevron bought Hess for roughly $60 billion a couple of months ago. See, while tight supply has buoyed natural gas prices this year, expected floods of gas from Qatar and North America should limit the energy’s profit margins from 2025. What’s more, the International Energy Agency thinks overall demand for coal, oil, and natural gas will peak before the end of the decade. No wonder firms are finding safety in numbers: it helps to be a big fish in a small pond, especially when the pond’s shrinking.