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Illinois First in Line for Expanded Fed Program; Bank of Canada Holds Rate Steady; ECB Decision in Focus
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Good day. More local governments will be eligible for a new Federal Reserve lending program, and Illinois, the most indebted state, will be the first to tap it. The Bank of Canada held its benchmark overnight interest rate at 0.25% and scaled back some of its market interventions, saying the Canadian economy appears to have avoided a worst-case scenario that might have led to a prolonged downturn. And the European Central Bank releases its latest policy decision at 7:45 a.m. ET. Investors have grown jittery in recent days about whether and how the ECB will expand its emergency bond-buying program.
Now on to today’s news and analysis.
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Fed Expands Municipal-Lending Facility to More Localities
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The Illinois State Capitol in Springfield, Ill. The state is set to become the first to tap a new Federal Reserve lending program. PHOTO: SETH PERLMAN/ASSOCIATED PRESS
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The Federal Reserve said it again would broaden the number of local governments eligible for a new lending program as Illinois announced it would be the first borrower to access the facility. The central bank said Wednesday it would allow all 50 states to designate two cities or counties to sell debts directly to the central bank’s program, creating an option for states with less populous municipalities to participate. Many state and local governments are facing cash crises as the coronavirus pandemic has crushed both their tax intake and driven an increase in their spending.
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Derby's Take: Central Bank Digital Money Could Thwart Credit Creation, Paper Says
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The introduction of a central bank digital currency has the potential to wreak havoc in a nation’s financial system, new research from the Federal Reserve Bank of Philadelphia says. Read more.
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Coronavirus Pandemic Drives Unemployment Up Across Metro Areas
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Unemployment rose in every metropolitan area in the U.S. in April, the first full month of widespread stay-at-home orders and business shutdowns. The Las Vegas area, with its heavy reliance on leisure and business travelers, had the highest unemployment rate among large metro areas, rising to 33.5% in April, double the national rate, the Labor Department said.
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Coronavirus Stimulus Funds Are Largely Depleted After Nine Weeks
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Of the total $1.6 trillion in aid, roughly $1.11 trillion, or about 70%, has been distributed, according to a Wall Street Journal analysis of government data and estimates by the Committee for a Responsible Federal Budget, a bipartisan nonprofit group.
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Key Developments Around the World
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Bank of Canada Leaves Key Interest Rate Unchanged
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The Bank of Canada kept its benchmark overnight interest rate on hold at 0.25%, as it scaled back some of its market interventions and said the impact of the coronavirus pandemic on the global economy appears to have peaked.
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Germany Adopts Second Stimulus Package
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Germany adopted its second economic-stimulus package since the start of the coronavirus pandemic, bringing their total cost to €1.3 trillion ($1.5 trillion), by far the largest in Europe as a share of gross domestic product.
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Saudi Arabia, Russia Agree to Extend Production Cuts as Oil Recovers
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Saudi Arabia and Russia have agreed to extend record production cuts through July, OPEC delegates said Wednesday, in a sign that many of the world’s largest oil producers are confident oil demand will return quickly as coronavirus lockdown restrictions ease around the world.
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Davos Meeting Going Ahead Next Year, Says World Economic Forum
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The World Economic Forum will go ahead with its annual meeting of corporate and policy-making heavyweights in January, billing the gathering as an opportunity to examine the impact of the new coronavirus on the world’s economies and societies.
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Financial Regulation Roundup
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U.S. Labor Department Allows Private Equity in 401(k) Plans
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Americans saving for retirement could soon find it easier to invest in private-equity funds, as the Labor Department on Wednesday approved including the asset class in defined-contribution plans like 401(k)s.
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Westpac Says AML Breaches Due to Technology, Human Error
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Australian lender Westpac Banking Corp. said millions of breaches of anti-money-laundering finance laws were caused by technology shortcomings and human mistakes, but an internal investigation had not found intentional wrongdoing by its staff. Westpac has been accused by Australia's financial-intelligence agency of the biggest breach of the country's money-laundering and terrorism financing laws in history, with more than 23 million breaches that include failing to detect transfers that may have been used to facilitate child exploitation in Asia and failing to report in a timely way about $7.5 billion in international transfers. (Dow Jones Newswires)
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China Revives London Stock-Listing Program
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China Pacific Insurance (Group) Co. said China’s market regulator had approved its planned listing in London, signaling that a tie-up between the U.K. and Shanghai stock markets is no longer on hold.
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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
8:30 a.m.: U.S. Commerce Department releases April international trade data
2 p.m.: Bank of Canada’s Gravelle speaks by videoconference
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8:30 a.m.: U.S. Labor Department releases May jobs report
3 p.m.: Federal Reserve releases April U.S. consumer-credit data
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For African-Americans, a Painful Economic Reversal of Fortune
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In the decade before Covid-19, African-Americans’ economic circumstances, crushed during the 2007-09 recession, had slowly but steadily improved, Greg Ip writes for the Journal. Then lockdowns crashed the economy, and last week the death of a black man, George Floyd, at the hands of police touched off a wave of angry and at times violent protests. The events have highlighted painful disparities that continue to weigh on African-Americans, in their health, their incomes and their treatment by the justice system.
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A monthly survey of U.S. nonmanufacturing activity by the Institute for Supply Management found retailers, restaurants and other service-oriented companies began to recover from the coronavirus pandemic in May, lifting an index of their activity to 45.4% from 41.8% in April. (Dow Jones Newswires)
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Most bond liquidity indicators are still significantly worse than at the peak of the December 2018 selloff, despite a recent improvement, MSCI's latest Liquidity Risk Monitor report shows. (DJN)
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Commercial bankruptcy filings in the U.S. increased more than 48% in May from a year earlier despite companies delaying seeking bankruptcy protection during the Covid-19 pandemic, according to legal services firm Epiq Global. It recorded 724 commercial chapter 11 filings last month, up from 487 a year earlier. (DJN)
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The number of unemployed eurozone residents rose by 211,000 during April, lifting the jobless rate there to 7.3% from 7.1% in the previous month, the European Union’s statistics agency 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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