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The Cost of $600-a-Week Jobless Aid; Turkish Lira’s Fall Drives Concerns for Euro; Bank of Canada to Phase Out Liquidity Measure
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Good day. The federal government spent nearly $250 billion on extra $600-a-week unemployment benefits from early April to the end of July, the Labor Department said. Meanwhile, the White House remained deadlocked with Democratic lawmakers over a broader pandemic relief deal with Democratic lawmakers. Outside the U.S., the sharp drop in the value of the Turkish lira is fueling concerns of fallout beyond Turkey’s borders. And improved short-term funding conditions prompted the Bank of Canada to announce it will unwind one of the liquidity measures it introduced at the beginning of the pandemic.
Now on to today’s news and analysis.
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Federal Government Sent Workers Nearly $250 Billion in $600-a-Week Jobless Aid
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The peak week for the $600 payments—known as Federal Pandemic Unemployment Compensation—came the week that ended June 26, when $18.6 billion was distributed, according to Labor Department data requested by The Wall Street Journal. That equates to about 31 million $600 payments that week, though a Labor Department spokeswoman said weekly amounts might include back payments. California received the largest total amount, $38.4 billion, and South Dakota received the least, $177.1 million, according to the Journal’s analysis.
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Trump, Democrats Open to Restarting Coronavirus Talks
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Trump administration officials and Democratic leaders urged each other to return to the negotiating table to craft a broad coronavirus package after President Trump issued executive actions on jobless aid and other relief over the weekend.
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CBO Estimates Federal Budget Deficit Shrank in July
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The U.S. budget deficit shrank last month to $61 billion from $120 billion a year earlier as households and businesses made tax payments that had been delayed from April, the Congressional Budget Office estimated.
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Employers Cast Wary Eye on Trump Payroll-Tax Deferral
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Employers considering President Trump’s plan to allow deferred payment of payroll taxes face a series of costs, uncertainties and headaches. The president wants employers to stop collecting the 6.2% levy that is the employee share of Social Security taxes for many workers, starting Sept. 1 and going through the end of the year. But his move, announced in a memo Saturday, doesn’t change how much tax employees and employers actually owe. Only Congress can do that.
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Key Developments Around the World
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Turkish Lira’s Fall Drives Concerns for Euro
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Investors say Turkey's embattled economy and reduced demand for European goods may pose a threat to the pace of the EU’s economic recovery. The Turkish lira has lost a fifth of its value against the euro this year. The pressure on the currency is raising alarms about Turkey’s long-term ability to repay its foreign debtors, including European banks. A weaker lira also makes imports more expensive and threatens to curb Turkey’s appetite for goods from Europe.
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Bank of Canada To Unwind One of Its Liquidity Measures
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The Bank of Canada says it would gradually unwind one of the liquidity measures it introduced at the beginning of the coronavirus pandemic because of improving market conditions. The central bank had temporarily allowed institutions to pledge 100% of their total collateral using their non-mortgage loan portfolio when borrowing from the bank's Standing Liquidity Facility as part of an effort to address widespread market turmoil. On Monday, the bank said it would gradually scale that back to the regular level of 20% "given the continued improvement in short-term funding conditions." The bank had earlier reduced the frequency of its term repo and bankers' acceptance purchase facility operations because of improving conditions. (DJN)
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Level of ECB's Net Weekly Corporate Bond Purchases Stuns Analysts
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The European Central Bank stunned analysts by buying a net of €1.7 billion of corporate bonds under its conventional bond-buying program last week, Commerzbank writes. The volume is impressive for the time of the year and is the highest volume in four weeks, the bank says. The purchases serve as a reminder "that quantitative-support is not exclusive to periods with substantial primary activity," Commerzbank credit strategist Cem Keltek says, referring to strong ECB purchases despite scarce sales of new corporate bonds. (Dow Jones Newswires)
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China Sanctions 11 Americans Over U.S. Moves Against Hong Kong
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China will impose sanctions on 11 U.S. citizens, including Republican Sens. Ted Cruz and Marco Rubio, in retaliation for similar measures by Washington against Hong Kong and mainland Chinese officials on Friday.
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Lebanon’s Government Resigns After Protests, Deadly Explosion
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Rather than resolving the political and economic crisis in Lebanon, the cabinet’s resignation is likely to trigger more political instability in one of the Middle East’s most important centers of culture and finance and an enclave of relative stability next to war-torn Syria.
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Financial Regulation Roundup
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Goldman, Morgan Stanley Ordered to Hold Highest Capital Ratios
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The Federal Reserve on Monday disclosed a key barometer of risk at the largest U.S. lenders, specifying for the first time the capital requirements the banks face based on their performance in the central bank's annual stress tests. Goldman Sachs Group and Morgan Stanley were ordered to hold the most capital of the 34 firms that participated in this year's tests, with ratios of 13.7% and 13.4% respectively, the Fed said. (Dow Jones Newswires)
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Hertz Sold $29 Million in Stock Before SEC Stepped In
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Hertz Global Holdings Inc. raised $29 million selling its likely worthless stock before regulators dissuaded it from selling more. The rental-car company disclosed results of an effort to sell as much as $500 million in shares despite the financial strains that drove it into bankruptcy.
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Interactive Brokers to Pay $38 Million to Settle Claims
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Interactive Brokers LLC has agreed to pay $38 million to settle claims by U.S. regulators that it failed to maintain an adequate anti-money-laundering program and failed to report potential manipulation of microcap securities in customer accounts.
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Consumer Lender Pays $21.7 Million Over Mexico Bribery Claims
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World Acceptance Corp. agreed to pay $21.7 million to resolve claims that a former subsidiary in Mexico paid millions in bribes to that country’s government and union officials, the U.S. Securities and Exchange Commission said.
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8:30 a.m.: U.S. Labor Department releases July PPI
10 p.m.: Reserve Bank of New Zealand releases policy statement and rate decision
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8:30 a.m.: U.S. Labor Department releases July CPI
10 a.m.: Boston Fed's Rosengren speaks on economy and financial conditions at virtual event
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Seizure in Global Tourism Is a Lingering Threat for Emerging Markets
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A coronavirus vaccine is critical for tourism-focused economies, Mike Bird writes at The Wall Street Journal because "International travel may be the last thing to recover from the pandemic. The same goes for the financial security of the economies most exposed."
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Imports at U.S. ports are expected to be at their lowest level in four years as demand continues to struggle with the coronavirus pandemic and after Global Port Tracker data issued by the National Retail Federation showed 1.6 million containers being handled in June, 10.5% lower on year and up 4.9% from May. (Dow Jones Newswires)
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The raw ingredients for goods including chocolate and clothes have rebounded after their pandemic-fueled declines, lifted by supply constraints and investors’ bets that a recovering economy will boost consumer demand.
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The U.K.'s headline unemployment rate has remained at 3.9% since the lockdown was introduced, official data showed. (DJN)
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U.K.-quoted companies issued 165 profit warnings in the second quarter of the year, almost 100 more than the same time a year prior, according to Ernst & Young. (DJN)
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Singapore's economy contracted faster in the second quarter than previously estimated amid continued fallout from Covid-19, revised data showed Tuesday. The economy shrank 13.2% in the quarter from a year earlier, compared with the prior estimate for a 12.6% contraction.
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South Korea's GDP is now forecast to shrink 0.8% in 2020 under a best-case scenario, better than the 1.2% contraction projected in June, the OECD said, saying the country is one of the most successful member countries in minimizing the impact of the Covid-19 pandemic. (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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