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Fed's Williams and Bullard Hopeful About Recovery, but Covid Risk Clouds Outlook; RBA Changed Guidance Policy Due to Uncertainty
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Good day. New York Fed President John Williams said he feels “relatively positive around how the economy is evolving,” but cautioned that rising Covid-19 cases put “a question mark on the ability of the economy to weather this period.” St. Louis Fed leader James Bullard struck a similar note, saying the economy has recovered faster than expected but “downside risk remains substantial.” And Australia’s central bank shifted away from making economic predictions in its forward guidance due to the uncertainty generated by the coronavirus pandemic, its governor said.
Now on to today’s news and analysis.
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Fed’s Williams: Covid Surge Clouds Economic Outlook
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John Williams, pictured in 2019, didn’t give much guidance about what’s next for central bank policy. PHOTO: LUCAS JACKSON/REUTERS
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Federal Reserve Bank of New York President John Williams said Friday that the recovery so far has been better than expected, but added that the rise of coronavirus cases puts a question over the outlook even as news of a potential vaccine suggests a solution to the crisis may be coming.
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Fed’s Bullard Says Economy Has Recovered Faster Than Expected
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Federal Reserve Bank of St. Louis leader James Bullard also said Friday that U.S. central-bank policy is in a good place as the economy continues to snap back amid challenges from the coronavirus pandemic.
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Millions of Unemployed Americans Face Loss of Benefits at Year’s End
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Two key programs Congress passed this year to expand and enhance unemployment insurance expire on Jan. 1, leaving millions of people without benefits unless lawmakers can break a monthslong deadlock over a fresh round of pandemic relief. That raises the risks that families of jobless workers will miss payments on mortgage or auto loans, face foreclosure or eviction and fall into poverty, economists warn—just as a rising tide of coronavirus infections threatens to undercut the economic recovery.
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Key Developments Around the World
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Governments Set to Show More Patience in Tackling Pandemic Debts
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Government debts are piling ever higher as the coronavirus pandemic heads toward its second year, with many businesses and households in parts of the world still reliant on the public purse to stay afloat. But one lesson that many governments in rich countries have learned from the last financial crisis is that they risk doing more harm than good by trying to roll back that surge in borrowing before their economies have healed, however long that takes.
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Australia Central Bank Changed Guidance Policy Due to Uncertainty
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Reserve Bank of Australia Gov. Philip Lowe said the bank now preferred to place more weight on actual outcomes in its forward-looking statements. He said labor markets are behaving differently to how they acted in the past, and that wage and inflation dynamics have changed.
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China Economy Gathers Steam, Setting Stage for a Strong Year-End
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Both investment and consumer spending grew at faster year-over-year rates in October than the month before, while industrial production, the first sector to emerge from this year’s coronavirus-induced slump, remained solid.
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Asia-Pacific Countries Sign Major Trade Pact in Test for Biden
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Fifteen countries including China signed a major trade deal on Sunday after years of tricky negotiations, posing an early challenge to President-elect Joe Biden as he formulates his administration’s trade policies.
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Boris Johnson’s Top Aide Quits, Suggesting a Political Shift in London
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Top aide Dominic Cummings, who championed Brexit and was a driving force behind an antiestablishment turn by Britain’s Conservative Party, is stepping down, a sign of the waning influence of a group of advisers that worked to pull their country out of the European Union.
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Financial Regulation Roundup
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Freddie Mac CEO Quits as Prospects Dim for Exit From U.S. Control
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Freddie Mac chief executive David Brickman plans to step down in January, the mortgage-finance company said in a securities filing, a surprise move that comes as prospects dim for an exit from government control.
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Wells Fargo Ex-CEO Settles SEC Claims
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Former Wells Fargo & Co. chief executive John Stumpf agreed Friday to pay $2.5 million to settle civil claims over his role in the bank’s fake accounts scandal, while regulators sued another departed Wells executive over fraud allegations.
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Beijing Attacks America’s New Investment Blacklist
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Beijing condemned a move by President Trump to block American investments in some key Chinese companies, following a steep selloff in shares of several of the targets, 31 companies the U.S. says is aiding the People’s Liberation Army and China’s intelligence and security services.
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8 a.m: European Central Bank’s Lagarde speaks at the Opening Plenary of the World Economic Forum's inaugural Pioneers of Change Summit
8:30 a.m.: European Central Bank’s Mersch speaks on monetary policy issues at an online OMFIF event
2 p.m.: Fed's Clarida in virtual discussion on U.S. monetary policy
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Time N/A: National Bank of Hungary releases policy statement
8:30 a.m.: U.S. Commerce Department releases October retail sales
9:15 a.m.: Federal Reserve releases October U.S. industrial production
1 p.m.: Atlanta Fed’s Bostic speaks at virtual racism and the economy series
2 p.m.: New York Fed's Williams serves as moderator for virtual discussion with Moody’s Chief Economist Mark Zandi hosted by Economic Club of New York
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Paper Finds Fed Corporate Bond Buying Aided Market Recovery
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Federal Reserve emergency support programs aimed at corporate borrowing got the job done, according to a new report from the Federal Reserve Bank of Philadelphia. “The announcements of the Federal Reserve’s interventions coincided with substantial improvements in trading conditions,” the report said. Its authors noted trading conditions for securities eligible for Fed purchase improved more than for those that were ineligible, and “when the facilities were expanded, liquidity conditions improved for a wide range of bonds.” Fed officials have been happy with their emergency lending efforts, but with many set to expire amid light use there is a question whether these efforts will be extended. On Friday,
St. Louis Fed leader James Bullard said it would be acceptable for the efforts to sunset because they could be resumed quickly if needed, which he believes the markets understand.
—Michael S. Derby
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Tech Could Trip Up Biden’s European Reunion
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While trade tensions between Brussels and Washington under a Biden administration are likely to abate, an end to the skirmishes over tech and tax that marked the Trump era is too much to hope for, Rochelle Toplensky writes at Heard on the Street.
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World Should Watch Japan’s Attempts to Save Its Struggling Banks
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Other advanced economies should pay attention to how Japan is trying to encourage mergers among its ailing regional banks because rock-bottom interest rates mean Japan’s present is likely to be their future, Mike Bird writes.
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The University of Michigan’s index of consumer sentiment dropped to 77.0 in the two weeks ended Nov. 10, from 81.8 in October. Economists surveyed by the Journal had expected a reading of 81.5.
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Dry weather, China’s push to fatten its pigs and the lockdown-induced baking bonanza are lifting prices for U.S. row crops.
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The pandemic’s disruptions have transformed how American consumers behave by accelerating their embrace of digital commerce, and the changes are likely to prove permanent, according to businesses studying and adapting to the changes.
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The eurozone’s gross domestic product was 12.6% higher in the third quarter than in the second, having fallen by 11.8% in the earlier period, the EU’s statistics agency said. (Dow Jones Newswires)
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The number of people working across the eurozone was 0.9% higher than in the second quarter, official data showed. That was a record rise, but only partly reversed the 2.9% decline in the three months through June. (DJN)
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India's trade deficit narrowed in October, shrinking to $8.71 billion from $11.75 billion a year earlier, the government 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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