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More From Davos; OCC Not Waiting for Fed on Lending Rule Changes; Bank of Canada Holds Steady
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Good day. Politicians battled over tariffs and banking leaders gave their two cents on monetary policy as the World Economic Forum in Davos continued. Comptroller of the Currency Joseph Otting said he plans to push forward with changes to rules overseeing low-income lending, even though the Federal Reserve isn't on board with his plan. And the central banks of Canada, Indonesia and Norway all held their key rates steady.
Now on to today’s news and analysis.
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U.S. Seeks to Reset Clock on China Engagement
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U.S. President Donald Trump speaks during a news conference at the World Economic Forum in Davos, Switzerland. PHOTO: Evan Vucci/Associated Press
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A week after the U.S. and China reached a truce in their trade war, the two countries took to the world stage in Davos this week to blame each other for starting it, starkly illustrating opposing interpretations of China’s journey since joining the World Trade Organization in 2001, writes WSJ's Greg Ip.
Also at the World Economic Forum, European politicians said they are prepared to retaliate against any U.S. tariffs, after President Trump set his sights on the continent as the next front in his global fight over trade.
Meanwhile, banking industry leaders at the conference discussed their views on monetary policy, with JPMorgan Chase CEO James Dimon saying he has concerns about negative interest rates, quantitative easing, and the diversion between stock prices, bond prices and yield. “It’s very hard for central banks to forever make up for bad policy elsewhere, [though] it’s a much bigger problem in Europe,” he said.
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Derby's Take: Idea That Fed Repos Are Driving Markets Gains Traction
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Dallas Fed leader Robert Kaplan last week put a crack in Federal Reserve officials’ position that the central bank’s recent balance-sheet growth is a technical move and not a form of stimulus.
Fed officials have said all the money they are adding to short-term financial markets in recent months has been aimed at maintaining control over their interest-rate target and tamping down on rate volatility. But Mr. Kaplan said that while he has supported the Fed’s actions, he was sympathetic to the concern that Fed actions are driving up stocks. Read More.
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Other Developments Around the World
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Bank Regulator Moving on Low-Income Lending Overhaul Without Fed
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Comptroller of the Currency Joseph Otting said he plans to push ahead with a proposal to overhaul rules governing billions of dollars of lending in low-income neighborhoods despite objections from the Fed, which has outlined an alternative plan.
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Fed Liquidity Operations Faced Conflicting Currents Wednesday
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The New York Fed implemented a $49.8 billion overnight repurchase agreement operation with eligible banks that took in $31.5 billion in Treasurys, $1.5 billion in agencies and $16.9 billion in mortgages, in exchange for central bank money. But it also implemented a $15.6 billion reverse repo with other firms that took liquidity out of the market.
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Bank of Canada Leaves Key Interest Rate Unchanged at 1.75%
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The central bank also marked down its estimates for near-term growth, opening the door for a future rate cut if the outlook worsens, noting that exports, business investment and job creation all weakened toward the end of 2019.
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Indonesia’s Central Bank Stands Pat as Expected
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Bank Indonesia kept its seven-day reverse repo rate at 5% on Thursday, as widely expected, citing an improving economic outlook and the stronger rupiah. The bank cut the rate four times last year by a total of 100 basis points.
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Norway central Bank Keeps Key Rate Unchanged at 1.5%
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Norway’s central bank left its key interest rate unchanged at 1.5% on Thursday, as expected, and reiterated its previous stance that the policy rate will likely remain at the present level in the coming period.
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Brexit Divorce Deal Clears U.K. Parliament
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The Brexit divorce deal completed its passage through Parliament on Wednesday evening, ensuring the U.K. will leave the European Union at the end of the month. The deal now just needs signoff from the Queen to become British law while on the European side, the EU council and commission presidents are due to sign off on the agreement Friday.
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Financial Regulation Roundup
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D.C. Attorney General Sues Trump Inaugural Committee, Business
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The District of Columbia attorney general alleged the inaugural committee abused its nonprofit status by overpaying the Trump Organization’s Washington hotel for event space to enrich the company.
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Investors Aim to Avoid Rent Control in U.S. Apartment Deals
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Some investors are shifting to parts of the U.S. that face little or no restrictions on raising apartment rents, a politically charged issue as more people are having a hard time keeping up with rent increases outpacing inflation in many parts of the country.
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7:45 a.m.: European Central Bank releases policy statement
8:30 a.m.: European Central Bank’s Lagarde holds press conference in Frankfurt
6:50 p.m.: Bank of Japan releases Dec. 18-19 meeting minutes
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5:30 a.m.: European Central Bank’s Lagarde speaks at global economic outlook session at World Economic Forum in Davos, Switzerland
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India Sees Opportunity as U.S. Remakes Its Alliances
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Indian Prime Minister Narendra Modi and U.S. President Donald Trump at "Howdy, Modi!" at NRG Stadium in Houston in September 2019. PHOTO: Saul Loeb/Agence France-Presse/Getty Images
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India sees the Trump administration’s reassessment of traditional U.S. alliances as a strategic opportunity—a shift allowing New Delhi to deepen ties with Washington without provoking retribution from China or destroying a longstanding partnership with Russia. That is a vision outlined by India’s foreign minister as officials plan a visit to New Delhi by President Trump that could take place in the coming weeks and introduce a limited trade agreement between the U.S. and the world’s fifth-largest economy, Yaroslav Trofimov writes at The Wall Street Journal.
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The U.S. inventory of homes for sale in December was at its lowest level in two decades, contributing to a rise in the median sales price for a previously owned home of 7.8% to $274,500 from a year earlier.
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U.S. union membership fell by 170,000 in 2019—a year when U.S. employers added more than 2.1 million jobs—reducing the share of the workforce in labor unions to 10.3%, the lowest level since 1983, the Labor Department said.
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Two more Chinese cities will be locked down by government authorities seeking to contain a fast-spreading coronavirus. The improvement in China's transport infrastructure since the 2003 SARS epidemic may mean its economy is more exposed now.
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Argentina's Buenos Aires Province extended its deadline for its creditors to accept a delay in the repayment of $250 million in foreign debt. Creditors now have until Jan. 31 to accept or reject postponing payment of the principal until May. The bonds come due on Sunday.
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Italian assets slumped Wednesday as fresh political uncertainty threatened to derail reforms and pose a further setback to a troubled economy, with the yield on 10-year government bonds climbing to the highest level since August in intraday trading.
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French manufacturing sector sentiment rose in January as business leaders became more optimistic, statistic agency Insee said a day after figures business sentiment in Germany improving.
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DP World, one of the world’s biggest ports and terminals operators, is expecting a pickup in trade amid signs of detente on the U.S.-China trade front, Sultan Ahmed Bin Sulayem, the company’s chairman and chief executive, said at the World Economic Forum in Davos.
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Natural disasters caused economic losses of $232 billion last year and cost the insurance industry and government-sponsored insurance programs $71 billion, according to Aon. (Dow Jones Newswires)
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