Good day. The Federal Reserve signaled disappointment in Treasury Secretary Stephen Mnuchin's decision not to renew some of the emergency lending programs it launched during the pandemic. A number of Fed officials, including Chairman Jerome Powell, in recent days had voiced support for extending the programs, but Mr. Mnuchin yesterday said credit markets have been rehabilitated. Meanwhile, the leaders of the Cleveland and Dallas Fed banks expressed concerns about the economy amid the Covid-19 surge.

Now on to today’s news and analysis.

Treasury Secretary Steven Mnuchin said he would allow several emergency Fed lending programs to expire, opening a divide with the central bank, which had pressed for an extension. As a result, on Dec. 31 several novel Fed programs that have backed corporate credit and municipal-borrowing markets and that have provided loans to small and midsize businesses and nonprofits during the coronavirus pandemic will end.

Loretta Mester of the Cleveland Fed and Robert Kaplan of the Dallas Fed both expressed worry about the economy in separate Bloomberg Television interviews, but were reticent to detail what more the Fed could do to help. Both regional Fed bank presidents hold voting roles on the interest-rate-setting Federal Open Market Committee this year.

Initial claims for jobless benefits, a proxy for layoffs, rose to a seasonally adjusted 742,000 last week, up from the 711,000 filed a week earlier. That level is more than three times higher than the roughly 210,000 typically filed each week in the first two months of 2020, though it is down sharply from a peak of nearly seven million in late March.

The labor market is flashing signs of slowdown in states where coronavirus cases are surging—and in places where they are not. The growth in the number of daily job postings in Midwestern states, where the virus is raging, is slowing sharply compared with October, according to data from the job site ZipRecruiter. But other states with among the lowest virus infection rates in the nation, including California, New York and North Carolina, are also seeing a slowdown.

The South African Reserve Bank kept its main repo rate at 3.5%, even as it forecast that Africa's most developed economy will shrink 8% this year. The bank's forecast is slightly more optimistic than the 8.2% contraction in GDP the bank had predicted in September. However, the SARB cut its GDP forecasts for 2021 and 2022, now predicting growth of 3.5% next year, down from 3.9%, and 2.4% in 2022, down from 2.6%. (Dow Jones Newswires)

One of China’s largest securities firms is under investigation for suspected market manipulation and its role in the recent debt-related woes of a state-owned coal miner, following a tumultuous week in Chinese credit markets.

1:30 p.m.: Kansas City Fed’s George speaks at virtual Kansas City and Dallas Fed event on energy and the economy

Time N/A: Central Bank of Nigeria releases policy statement
3 p.m.: Chicago Fed’s Evans speaks online on economy and monetary policy to Iowa Bankers Association

Emerging markets face the biggest challenges from climate change, says a new report from Capital Economics. Parts of Africa, South and Southeast Asia are most vulnerable under a scenario of rising global temperatures and more severe weather, the research firm said. If any nation might benefit economically, it would be through investments to counter climate change, the report said, adding, “One group of winners will be commodity producers that are able to provide the resources needed for the transition to cleaner forms of energy.” Oil exporters will suffer as the world moves away from fossil fuels, but that will benefit many emerging-market nations that are importers of these commodities. The report also said, “If food production is disrupted in equatorial countries, then producers in Eastern Europe and Latin America might find new export markets.” (Michael S. Derby)

• U.S. home sales rose to a 14-year high last month, a rare bright spot for the economy as ultralow borrowing costs and the sudden shift in living preferences during the pandemic power the market.
• The expansion pace of manufacturing activity in the central part of the U.S. slowed in November compared with the previous month. The Kansas City Fed's Tenth District Manufacturing Survey's composite index came in at 11 in November, down from October's 13. (DJN)
• Manufacturing activity in the Philadelphia area eased its expansion pace in November compared with the prior month. The Philadelphia Fed's diffusion index for current general activity stood at 26.3 in November, down from 32.3 in October. (DJN)
• Lumber prices are making an unusual late-season climb, thanks to builder-friendly autumn weather and suppliers stocking up for what they expect to be another big year for home construction.
• U.K. retail sales rose 1.2% month-on-month in October, official data showed. (DJN) 
• Total U.K. public borrowing from debt markets so far this fiscal year has soared to a record £214.9 billion, exceeding official initial forecasts and borrowing in the aftermath of the global financial crisis of 2008. (DJN) 

This newsletter is compiled by James Christie in San Francisco and Ed Ballard in London. 

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