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Fed Officials Suggest More Support for Economy Is Needed; Australia Enters Recession; Bank of Japan Hints at Policy Review
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Good day. Federal Reserve Bank of Richmond leader Tom Barkin in an interview with The Wall Street Journal said the Federal Reserve will need to provide sustained support to the U.S. economy due to a slowing recovery in the jobs market. Meanwhile, Federal Reserve governor Lael Brainard said Tuesday the economy faces substantial risks, adding that “in coming months it will be important for monetary policy to pivot from stabilization to accommodation.” Her comments came as a survey of purchasing managers in manufacturing found U.S. factory output grew in August at the fastest pace since November 2018, though the picture for employment was mixed.
Now on to today’s news and analysis.
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Fed’s Barkin Says Economy Will Need Sustained Support
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‘It’s hard for me to make the case right now that we ought to be anywhere other than where we are,’ Richmond Fed President Tom Barkin said. PHOTO: ASSOCIATED PRESS
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The Federal Reserve will need to continue providing significant and sustained support to the economy as it faces a slowing labor-market recovery, Tom Barkin, president of the Federal Reserve Bank of Richmond, said in an interview with The Wall Street Journal.
Mr. Barkin said the labor market’s recovery has been slower than he anticipated because the coronavirus has proven harder to contain than he expected. How individuals comply with public-health protocols will be a key factor in determining the durability of any recovery, he said.
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Brainard Says Economy Faces High Uncertainty, Prominent Risks
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The risk of permanent layoffs and business bankruptcies will rise the longer uncertainty related to the coronavirus pandemic remains high, Federal Reserve governor Lael Brainard said in a speech Tuesday.
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U.S. and Global Factory Output Picks Up, but Jobs Picture is Mixed
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U.S. factory output continued to grow in August, according to a pair of surveys released Tuesday, but the picture for employment was mixed, a possible sign of lingering uncertainty about the coronavirus pandemic among American manufacturers.
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Summer Fuel Demand Disappoints, Challenging Economy
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After demand for gasoline surged from mid-April to late June, consumption has stayed relatively flat in the past two months and remains well below its prepandemic levels, government data show.
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Demand for Houses Boosts Home Construction
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New single-family-home sales rose 13.9% in July from June to a seasonally adjusted annual rate of 901,000, the highest level since December 2006, while single-family housing starts, a measure of U.S. home building, rose 8.2% in July from June.
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Newsmakers Live: Q&A With Raphael Bostic
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Atlanta Fed President Raphael Bostic will join Wall Street Journal chief economics correspondent Nick Timiraos for a conversation on the economic outlook and the central bank’s response to the coronavirus pandemic shock. Sign up here to be notified when the Sept. 3 event begins and to submit questions in advance.
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Key Developments Around the World
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Australia Enters Recession for the First Time in Nearly Three Decades
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Australia’s first recession in 29 years was confirmed on Wednesday when data showed the economy contracted by a record 7% in the three months through June, compounding a 0.3% drop in gross domestic product in the first quarter. It marked the end of the longest-running growth streak in the developed world.
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BOJ Deputy Gov. Hints at Possible Policy Review for Covid-19 Era
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One of the Bank of Japan ’s two deputy governors hinted at the possibility of the central bank reviewing its monetary policy to better serve an economy coexisting with the coronavirus pandemic, following in the footsteps of other major central banks.
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Israel, U.A.E. Pursue Economic Ties in Wake of Breakthrough
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Israel and the United Arab Emirates agreed to promote bilateral trade and business activity as they move to normalize ties, but pushed discussion over the thorny issue of the sale of advanced U.S. military hardware to the Emiratis to a later stage.
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Germany Expects V-Shaped Economic Rebound From Coronavirus
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Germany’s economy is recovering faster than was anticipated a few months ago, helped by a mild and short coronavirus lockdown, a large-scale fiscal stimulus and Berlin’s close trade links with China, according to new government forecasts.
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Low Rates Needed Despite Inequality, Stability Risks, RBNZ Says
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Low interest rates could widen income inequality by pushing up asset prices, but are needed to combat unemployment during the coronavirus pandemic, Reserve Bank of New Zealand Gov. Adrian Orr said.
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Copper Hits Two-Year High on China Rebound
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Copper prices jumped to a two-year high on evidence that China’s economic recovery motored ahead in August, as well as a weakening dollar. Three-month copper forwards on the London Metal Exchange, the benchmark in international metal markets, rose 1.2% Tuesday to $6,754 a metric ton—their highest level since June 2018. Nickel, zinc, lead and other industrial metals also advanced.
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Financial Regulation Roundup
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Credit Suisse Faces Enforcement Proceedings Over Spying Scandal
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Switzerland’s financial regulator said Wednesday it had started enforcement proceedings against Credit Suisse Group over the physical surveillance of two bank executives last year.
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Trump Payroll-Tax Deferral Leaves Employers Wary as Plan Starts
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President Trump’s payroll-tax deferral plan started Tuesday, but many employers seem unlikely to adopt the policy, which would effectively give their workers a short-term interest-free loan.
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Appeals Court Temporarily Blocks Subpoena of Trump Tax Returns
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Manhattan prosecutors can’t obtain President Trump’s tax returns during a pending appeal, a three-judge panel ruled Tuesday, handing a temporary win to Mr. Trump in his bid to shield financial documents from a criminal probe.
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Court Weakens Bankruptcy Protections for Private Student Loans
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An appeals court sided with borrowers who sought to discharge private student loans after filing for bankruptcy, a win for consumers trying to cancel their shares of roughly $50 billion in private educational debt.
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German Parliament to Investigate Wirecard Scandal
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German lawmakers said Tuesday they would launch a parliamentary probe into the government’s failure to uncover the Wirecard AG scandal, a setback for Chancellor Angela Merkel’s administration ahead of next year’s general election.
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Insurance Firms Gain Early Lead in Virus Legal Fight With Businesses
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U.S. property insurers have won a flurry of judicial rulings backing up their rejections of claims for businesses’ lost income during government-ordered shutdowns, dimming policyholders’ hopes of payments to help them rebound.
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9 a.m.: Bank of England’s Bailey, Ramsden and Vlieghe speak at Treasury Committee hearing on economic impact of the coronavirus at Parliament
10 a.m.: New York Fed’s Williams speaks on Covid-19 during webinar
10 a.m.: Cleveland Fed’s Mester speaks on U.S. outlook and monetary policy during online seminar
10:30 a.m.: Bank of England’s Broadbent gives speech at Central Bank Research Association online meeting
11:30 a.m.: Bank of England’s Haldane chairs panel at Central Bank Research Association online meeting
2 p.m.: U.S. Federal Reserve releases beige book report on U.S. economic conditions
2 p.m.: Minneapolis Fed’s Kashkari speaks online about lack of Black financial regulators
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8:30 a.m.: U.S. Commerce Department releases July international trade data
10 a.m.: Bank of England’s Bailey gives online speech on the future of cryptocurrency and stablecoin
11 a.m.: European Central Bank’s Schnabel speaks at online ECB research conference
12 p.m.: Atlanta Fed’s Bostic speaks on economic outlook and Fed’s pandemic response in online Wall Street Journal conversation
1 p.m.: Chicago Fed’s Evans speaks online on economy and monetary policy
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Why Factories Are So Strong in a Pandemic
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People are now buying the cars they were planning to buy before the Covid-19 crisis struck, but there is no catch-up spending on services or restaurant meals they missed, Justin Lahart writes at The Wall Street Journal.
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U.S. eviction proceedings for retail tenants are picking up across the country as courts reopen and states’ moratoriums on evictions are expiring or getting curtailed as the economy reopens.
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Treasury Secretary Steven Mnuchin urged Congress to appropriate more money to combat the effects of the coronavirus pandemic, saying at a hearing Tuesday that he was read.
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German jobless claims fell again in August, offering more evidence Europe’s economic powerhouse is on track for recovery. Claims declined by 9,000 after falling by 17,000 in July, the Federal Employment Agency said. Economists polled by The Wall Street Journal had forecast an increase of 20,000. (Dow Jones Newswires)
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Brazil's trade surplus narrowed in August as exports of crude oil and iron ore plummeted, the economy ministry said Tuesday, noting a surplus of $6.6 billion after a July surplus of $8.1 billion. (DJN)
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This newsletter is compiled by James Christie in San Francisco and Ed Ballard in London.
Send us your tips, suggestions and feedback. Write to:
Jon Hilsenrath, Michael Derby, Nell Henderson, Nick Timiraos, Jason Douglas, Paul Hannon, Harriet Torry, Kate Davidson, David Harrison, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Michael Maloney, Paul Kiernan, James Glynn
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