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U.S. Officials Warn of Lackluster Recovery Without Fiscal Action; Turkish Lira Sinks to Record Low After Central Bank Holds Fire
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Good day. Federal Reserve officials and some other policy makers are stepping up calls for a quick jolt of stimulus spending as recent economic data point to uneven growth. “This is not a good time to have fiscal policy switch from being accommodative to creating a drag,” former Fed Chairwoman Janet Yellen said. New York Fed researchers set out what they consider to be the ideal mix of economic support policies in a paper published this week. Meanwhile, the Turkish lira fell to a record low after the country's central bank held rates steady, disappointing investors who believe higher rates would help to tamp down inflation.
Now on to today’s news and analysis.
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Officials Call for Quick Stimulus Deal to Forestall Lackluster Recovery
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Economic policy makers are concerned that even if the current U.S. recovery is self-sustaining, a delay to more fiscal support could lead to a repeat of the lackluster rebound from the 2008 financial crisis, when a burst of spending was followed by an abrupt reversal. The worry is that as long as the coronavirus pandemic saps consumer spending, especially in high-contact service industries, policy makers will be less successful in staving off traditional recessionary forces.
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“Premature withdrawal of fiscal support would risk allowing recessionary dynamics to become entrenched."
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— Fed governor Lael Brainard
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U.S. Jobless Claims Fell to Lowest Level Since March
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Weekly initial claims for jobless benefits, a proxy for layoffs, fell by 55,000 to a seasonally adjusted 787,000 in the week ended Oct. 17, the Labor Department said. Claims for the prior two weeks were revised lower, reflecting new data from California. The revised level of claims for the week ended Oct. 3—767,000—was the lowest since the March 14 week, when less than 300,000 new claims were filed.
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U.S. Existing-Home Sales Rose 9.4% in September
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Existing-home sales rose 9.4% in September from August to a seasonally adjusted annual rate of 6.54 million, the highest rate since May 2006, the National Association of Realtors said Thursday. The September sales marked a 20.9% increase from a year earlier.
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Key Developments Around the World
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Turkish Lira Slides to Record Low as Central Bank Holds Fire
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Turkey’s currency hit a record low against the dollar Thursday after the country’s central bank held interest rates steady despite intensifying pressure to act. The lira fell 2.1% on Thursday, with $1 buying 7.9792 lira, after the central bank left its key, one-week repo rate at 10.25%, surprising the majority of investors and analysts who anticipated an increase.
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Second Coronavirus Wave Destabilizes European Recovery
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The second wave of the coronavirus now sweeping Europe is threatening to halt the region’s recovery, leaving many of its businesses and workers uncertain about their future and prolonging the time it will take to heal from the worst economic crisis in decades.
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Singapore Narrows 2020 Inflation Forecast Range
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Singapore's headline and core consumer prices are likely to be between flat and a 0.5% decline this year, the Monetary Authority of Singapore and the Ministry of Trade and Industry said Friday. The revised forecast compares with a previous projection for the headline and core consumer-price indexes to be between flat and a 1.0% drop in 2020. (Dow Jones Newswires)
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Russian Central Bank Holds Benchmark Interest Rate at 4.25%
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The Russian central bank kept its key interest rate at a record low 4.25% as a swift rise in coronavirus cases clouded the economic outlook and volatility in the Russian ruble has increased ahead of the U.S. election. Several cuts earlier this year drove the rate to a post-Soviet low. The bank said it would consider further cuts at upcoming meetings. (DJN)
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Uganda Central Bank Holds Key Lending Rate at 7%
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Uganda's central bank held its benchmark lending rate at 7% on Thursday as Africa's top coffee producer looks to spur growth, citing the worsening local and global economic fallout from the coronavirus pandemic. "The economic outlook is extremely uncertain, largely because of the unpredictable course of the virus and the wide range of shocks hitting the economy" said central bank Governor Emmanuel Tumusiime-Mutebile. (DJN)
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Financial Regulation Roundup
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Goldman Pays Billions to End 1MDB Scandal
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Goldman Sachs Group admitted it broke U.S. corruption laws, agreed to pay billions of dollars to global regulators and financially punished its top executives, resolving one of the biggest scandals in Wall Street history.
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SEC Whistleblower Program Awards Tipster a Record $114 Million
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The Securities and Exchange Commission’s whistleblower program on Thursday awarded more than $114 million—the highest-amount ever—to a person whose information helped it and another agency bring successful enforcement actions against a company, the agency said.
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FASB to Explore Greater Disclosure of Supply-Chain Financing
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The Financial Accounting Standards Board, the private organization that sets accounting standards, voted to add to its agenda a project exploring greater disclosure surrounding supply-chain financing arrangements.
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Sun Life Financial to Buy Majority Stake in Crescent Capital
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Canadian insurer Sun Life Financial is buying a majority stake in private-credit fund manager Crescent Capital Group LP to expand its alternative investments arm, SLC Management. Sun Life will pay up to $338 million, the company said, for a 51% stake in Crescent, which Mark Attanasio and Jean-Marc Chapus founded about three decades ago after working for Michael Milken at now-defunct junk-bond powerhouse Drexel Burnham Lambert.
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09:45: IHS Markit releases U.S. October U.S. flash services PMI, flash manufacturing PMI
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NY Fed Paper Lays Out Mix of Support to Keep Workers Employed
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Researchers at the Federal Reserve Bank of New York, examining economic support policies put in place during the pandemic settled on an ideal mix of policies that help keep workers on the job and aid the unemployed. They wrote in a paper released Wednesday that the ideal mix includes 20% of support money going to subsidies for companies to retain existing workers, with the remainder going to unemployment insurance payouts. “This allocation is sufficient to save high-productivity jobs from dissolution, while the remaining funds are used to provide income to less-productive workers who face inevitable job loss,” wrote economists Serdar Birinci, Fatih Karahan, Yusuf Mercan and Kurt See.
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Housing Boom May Not Outlast Covid Crisis
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"The coronavirus crisis may have, in effect, pulled forward a lot of housing activity that would have eventually happened in any case," Justin Lahart writes for Heard on the Street. "Couples with children throwing in the towel and moving to the suburbs isn’t exactly a new phenomenon, after all. Many of the people who decamped this year might have otherwise done so over the next few years. So when the Covid crisis ends, the pool of people ready to take flight to the suburbs might be smaller."
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Manufacturing activity in the central U.S. expanded in October for a fifth consecutive month, at a slightly faster pace than in September, a Federal Reserve Bank of Kansas City survey showed. The Tenth District Manufacturing Survey's composite index stood at 13 in October, up from September's 11 reading. (Dow Jones Newswires)
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The Conference Board's Leading Economic index, a measure of U.S. business cycles, came in at 107.2 in September, up 0.7% from August. It was the fifth straight monthly increase, but the expansion pace decelerated. (DJN)
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U.S. mortgage rates ticked down to another low for the past week, according to Freddie Mac's latest survey. For the week ended Thursday, the average rate on a 30-day fixed rate mortgage averaged 2.80%, down from 2.81% last week. (DJN)
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Eurozone manufacturing activity grew at a faster pace in October but tighter coronavirus restrictions took a toll on the services sector. The IHS Markit eurozone manufacturing purchasing managers' index rose to 54.4 in October from 53.7 in September while the services PMI fell to 46.2 from 48.0. (DJN)
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Oilfield services companies have been slashing costs during the pandemic, but their latest results show them considering the next step, including hydrogen, carbon capture and geothermal energy.
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Uber and Lyft must comply with an order that requires them to reclassify their drivers as employees, a California appeals court said Thursday, siding with a lower-court ruling from August that threatened to upend the companies’ business models.
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With a new generation of giant container ships, firms and governments made a big bet on the future of globalization—and lost.
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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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