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Powell Talks Virus Response; ECB Lifts Bond-Buying Limit; Lessons From TARP; India Cuts Rates
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Good day. On the day U.S. weekly unemployment claims came in at 3.28 million, Fed chief Jerome Powell sat for a TV interview to discuss how the central bank aims to keep credit flowing. The European Central Bank said it wouldn't be bound by an earlier cap on how much of any one eurozone country's debt it can buy, signaling its willingness to support Italy and other indebted countries. India's central bank cut rates. And we look at how the U.S. coronavirus stimulus came together with a speed and a degree of consensus that was largely absent from the 2008 bailouts.
Now on to today’s news and analysis.
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PHOTO: MARK MAKELA/GETTY
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Powell Says U.S. May Be in Recession, Virus Will Dictate Timetable
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Federal Reserve Chairman Jerome Powell said the U.S. economy “may well be in a recession,” but that the central bank is taking unprecedented action to help ensure economic activity can resume as soon as the coronavirus pandemic is under control. The Fed’s job now is to make sure businesses of all sizes can have a “bridge” of support, including through emergency lending programs the central bank has been rolling out, he said.
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ECB Begins New Bond Purchases, Supporting Virus-Hit Nations
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The European Central Bank sent a powerful and unexpected signal to investors that it will aggressively support Italy and other indebted eurozone countries that are battling the coronavirus, starting purchases under a new €750 billion ($812 billion) bond-buying program and stating that it won’t be bound by earlier limits on its bond buys.
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Stimulus Takes Lessons From Troubled Asset Relief Program
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As the financial markets seized up, the Fed responded much as it did in the last financial crisis: with lower interest rates, generous loans to banks and securities dealers, facilities to extend credit to blue chip companies and local governments. But in the current relief package, instead of bailouts of financial institutions, taxpayer cash is going to Main Street businesses so they can meet their bills, pay employees and keep their doors open, Greg Ip and Jacob M. Schlesinger write in The Wall Street Journal.
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Kashkari: ‘It’s Much Better to Intervene Quickly’
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Minneapolis Fed President Neel Kashkari has a unique perspective on the last economic crisis and this one. In a Q&A with the Journal, he says a key lesson learned from overseeing TARP is that a speedy response is essential.
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"Loan guarantees have worked for very, very big companies. If you give small businesses a loan they have to pay back you’re just adding to the principal. How are you ever going to get out from under that?"
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— Neel Kashkari
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Derby's Take: So Much Fed Liquidity That Some Firms Are Handing It Back
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The flood of cash the Fed has pumped into the market has pushed money-market rates to low enough levels that some money managers and other firms find it easier to park cash back on the central bank’s books. Read More.
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Key Developments Around the World
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House Leaders Rush to Get Quorum for Vote on $2 Trillion Package
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House leaders were scrambling to bring back enough legislators to form a quorum to pass a $2 trillion economic rescue package after a Republican lawmaker suggested he might object to holding the vote using a procedure that avoids putting members on the record.
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RBI Cuts Policy Rate In Surprise Move After Government Stimulus
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The Reserve Bank of India cut its key rate to 4.4% from 5.15% in an unscheduled move Friday, to mitigate the impact of the pandemic and maintain financial stability. The government unveiled a $22.5 billion stimulus plan.
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The central bank's move came after India’s government unveiled $22.5 billion in spending to help the country’s poor survive a nationwide shutdown.
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The Bank of England said its Monetary Policy Committee decided to keep the benchmark rate at 0.1% and to press ahead with £200 billion pounds ($236.58 billion) of asset purchases agreed, but also said there could be a further expansion of asset purchases if needed.
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Meanwhile, the BOE’s Prudential Regulation Authority sent an open letter to bank chief executives calling on them to avoid an “unnecessary tightening in credit conditions” as lenders look to estimate expected losses on bad loans for the year ahead.
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The European Central Bank Governing Council is keeping the possibility of an interest-rate cut open, Pablo Hernandez de Cos, governor of Spain's central bank, said in an interview with German newspaper Handelsblatt. (Dow Jones Newswires)
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The Riksbank said it will now buy commercial paper in the secondary market issued in Swedish kronor by Swedish non-financial corporations for a nominal amount of SEK4 billion. The central bank previously decided to extend its bond purchases this year by up to 300 billion Swedish kronor ($29.7 billion). (DJN)
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Short-Term Yields Go Negative in Scramble for Cash
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Yields on the safest, short-term Treasurys have settled into negative territory for the first time in more than four years, as investors continue clamoring for cash and safe dollar assets even as some markets show signs of normalization. The one-month Treasury bill yield closed at -0.112% and the three-month bill ended at -0.072% Thursday.
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Coronavirus Fallout Prompts S&P to Downgrade Mexico’s Rating
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S&P Global Ratings cut Mexico’s sovereign credit score, saying it expected fallout from the coronavirus pandemic and the drop in oil prices to cause the country's economy to contract for a second consecutive year.
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China's Postcoronavirus Reboot Looks Slow and Rocky
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In some ways, China is where the U.S. and Europe hope to be within weeks or months. Yet many Chinese factories find demand for their products has evaporated and consumers are reluctant to spend over worries about what they have lost and what lies ahead.
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Financial Regulation Roundup
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U.K. Regulators Try to Ease Financial-Reporting Burdens
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The Financial Conduct Authority, Financial Reporting Council and Prudential Regulation Authority announced a series of measures Thursday to ease the burden of financial reporting, including an extra two months for listed companies to publish audited annual financial reports and guidance for auditors grappling with new uncertainties.
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SEC Suspends Trading of Zoom Technologies Over Name Confusion
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The Securities and Exchange Commission suspended trading of Zoom Technologies for two weeks because many traders have confused the company with the similarly-named Zoom Video Communications. (DJN)
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Mnuchin Forms Task Force on Mortgage Firms’ Cash Crunch
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Mortgage firms, which are mostly nonbank firms with no access to emergency lending from the Federal Reserve, are concerned they will have to come up with tens of billions of dollars on short notice.
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U.S. Banks Urged to Issue More Small-Dollar Loans
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The Federal Deposit Insurance Corp. and other regulators aim to revive a riskier lending sector that dried up in the years after the 2008 financial crisis to steer consumers away from more-predatory, payday forms of lending.
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Canada's Trudeau Says Officials Pushing for Debt Relief
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Canadian Prime Minister Justin Trudeau said senior officials are pressing chartered banks and credit-card companies to offer relief for income-strapped individuals and households, either through extended grace periods or lower interest rates. Canada will also triple the amount of insured mortgages it is willing to acquire from lenders to C$150 billion. (DJN)
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SEC Enforcer Stanley Sporkin Cracked Down on Corporate Bribery
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Stanley Sporkin, who forced changes in corporate behavior in the 1970s as a crusading enforcement chief at the Securities and Exchange Commission by cracking down on bribery of foreign officials, has died of congestive heart failure at the age of 88.
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8:30 a.m.: U.S. Commerce Department releases February personal income and outlays
10 a.m.: University of Michigan releases final March U.S. consumer sentiment
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Washington’s Trillions Alone Can’t Stop the Jobpocalypse
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The massive jump in U.S. unemployment insurance claims doesn’t tell you precisely how bad the hit to the job market is going to be, but it does show that it is going to be horrible, Justin Lahart writes at The Wall Street Journal.
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He notes that many state labor departments have been inundated with people filing for claims, so not everybody who has tried to file has been able to get through, while many who lost jobs will take some time to file.
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Manufacturing in the central U.S. fell sharply from a month ago, according to a monthly survey by the Federal Reserve Bank of Kansas City, which reported its composite index of factors such as employment and production dropped to -17 for March, the lowest reading since April 2009, from 5 in February. (DJN)
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German consumer sentiment is poised to plunge to its lowest level since May 2009 due to the jump in the number of coronavirus cases in the country and containment measures, market-research group GfK said. (DJN)
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French manufacturing sentiment dropped this month without fully reflecting weakening business sentiment, according to statistics agency Insee, whose monthly survey showed sentiment in the sector falling to a reading of 98 from February’s 101, which was revised down. (DJN)
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ABN AMRO Bank said Thursday it will take a $200 million net loss after a U.S. client of the Dutch lender’s clearing division couldn’t meet a margin call on a loan.
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Many refiners in Europe and the U.S. are refusing to take more Saudi crude being offered at cut-rate prices, according to Saudi officials and oil traders, threatening the sustainability of a price war and battle for market share started by Riyadh.
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Norway's sovereign-wealth fund, the world's largest, said its returns so far in 2020 are down by 1.33 trillion Norwegian kroner ($122 billion) on the year due to the financial-market collapse caused by the coronavirus pandemic and a heavy exposure to equities. As of March 25, the value of the fund stood at NOK10.127 trillion ($929 billion). (DJN)
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Businesses will cut overseas investments by as much as 40% this year, the largest retrenchment in response to a worsening economic outlook since records began in the 1970s, the United Nations said. (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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