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OECD Sees Highest Jobless Rate Since Great Depression; RBA Leaves Policy Unchanged; Malaysia Central Bank Cuts Key Rate
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Good day. Unemployment in the most advanced economies will end 2020 at the highest level since the Great Depression, and the situation could worsen if a second wave of outbreaks leads to fresh lockdowns, the OECD said. Meanwhile, the Reserve Bank of Australia left policy unchanged and pledged to maintain an accommodative stance for as long as it takes. And Malaysia's central bank cut its policy rate to a record low.
Now on to today’s news and analysis.
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Unemployment Expected to Hit Highest Level Since Great Depression
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PHOTO: OLIVIER DOULIERY/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Unemployment rates in the world’s advanced economies will end the year higher than at any time since the Great Depression and won't return to their pre-pandemic levels until 2022 at the earliest, the Organization for Economic and Cooperation and Development said. The OECD warned against the premature withdrawal of emergency employment support, and said governments should launch new programs to encourage firms to hire workers, particularly those entering the job market. If the U.S. is hit by a second wave of lockdowns, the OECD forecasts jobless rates of 12.9% in 2020 and 11.5% in 2021, compared with 11.3% this year and 8.5% next year if there is no sustained resurgence.
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RBA to Keep Rates Low for as Long as It Takes
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Australia's central bank left its policy settings unchanged at its board meeting Tuesday and warned that economic uncertainty remains elevated with key regions like the state of Victoria still threatened by lockdowns.
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Key Developments Around the World
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Bank Negara Malaysia Cuts Policy Rate to Record Low
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Malaysia’s central bank cut its benchmark interest rate by 25 basis points to a record low 1.75% in a bid to help the economy recover from the impact of the Covid-19 pandemic. Eight of 13 economists polled by WSJ had expected a cut.
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Small Business Loans Helped the Well-Heeled and Connected, Too
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The federal government’s Paycheck Protection Program designed to help small businesses weather the pandemic helped a range of organizations including prominent restaurant chains, law firms and non-profits.
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Canadian Business Optimism at Lowest Level Since Financial Crisis
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The Bank of Canada’s quarterly business outlook survey found many firms saying weak demand is reducing capacity pressures and price-growth expectations, while forward-looking sales indicators have collapsed.
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U.S. Business Groups Urge China to ‘Redouble Efforts’ on Trade Deal
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As U.S. and Chinese officials plan to discuss China’s compliance with a trade deal signed early this year, more than 40 American business groups called on Beijing to step up purchases of U.S. manufactured goods as well as energy and other products.
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Governments Eye Green Recovery. Some Industries Aren’t Convinced.
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Governments around the world are spending like never before to kick-start their economies in the wake of Covid-19 lockdowns, in many cases tying green initiatives to rescue packages, even as some industries say saving jobs should trump environmental concerns.
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Financial Regulation Roundup
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Second Wirecard Executive Arrested and Questioned by Prosecutors
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A second Wirecard WDI AG executive was arrested and questioned by German prosecutors Monday as part of their investigations into suspected fraud at the insolvent, one-time star of the European tech sector.
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U.K. Sanctions Saudis, Russians for Human-Rights Abuses
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The U.K. government issued sanctions against dozens of Russian and Saudi nationals for alleged human-rights abuses, extending legislation along the lines of the U.S.’s Global Magnitsky program targeting corrupt actors and human-rights offenders.
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U.K. Regulator Orders Big Four to Separate Audit Practices by 2024
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The Financial Reporting Council told the country’s biggest professional services firms to draw up plans for separating their audit businesses by Oct. 23 and for the work to be completed by mid-2024.
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10 a.m.: U.S. Labor Department releases May Job Openings and Labor Turnover Survey
11 a.m.: Fed’s Barkin speaks during a virtual event
1 p.m.: Fed’s Quarles speaks on financial stability at a virtual event
2 p.m.: San Francisco Fed’s Daly and Richmond Fed’s Barkin speak during the National Association for Business Economics webcast
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Time N/A: National Bank of Poland releases policy statement
4:45 a.m.: European Central Bank’s de Guindos speaks during an online debate with ESM Chair Klaus Regling on "The Pandemic Crisis in Europe: Impact, Policy Responses and the Road to Recovery", organized by Goldman Sachs
10 a.m.: European Central Bank’s de Guindos speaks during a virtual meeting organized by Consejo Empresarial Alianza por Iberoamérica
12:15 p.m.: Atlanta Fed’s Bostic speaks on the Federal Reserve’s response to Covid-19 during a virtual event
3 p.m.: Federal Reserve releases May U.S. consumer-credit data
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Will the U.S. Economy Go Back Out of Service?
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The services sector rebounded in June, but with new Covid-19 cases rising in many parts of the country, the big question is whether the snapback will stick, Justin Lahart writes at The Wall Street Journal. "Having seen how Covid-19 cases are flaring up in places that were quicker to reopen their economies, it seems that more caution is in order, but also more creativity," he says. "Coming up ways to help business improve without imperiling public health is key to a sustained service recovery."
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U.S. services industries showed signs of recovery in June as businesses took early steps to reopen following the easing of some lockdowns, according to two surveys of purchasing managers.
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Natural-gas prices have bounced back from the 25-year low reached late last month, but analysts and traders don’t expect them to go much higher—at least until it is time to turn on the heat.
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The eurozone's economic output will fall by 8.7% in 2020, a deeper decline than the 7.7% forecast three months ago, the European Commission said. (Dow Jones Newswires)
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German manufacturing orders rose 10.4% on the month in May in adjusted terms after a downwardly revised 26.2% decline in April, according to federal statistics office Destatis. (DJN)
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Eurozone retail sales rebounded more strongly than expected in May as lockdowns to contain the spread of the coronavirus pandemic began to ease, lifting the volume of sales by 17.8% from April, the European Union’s statistics agency said. (DJN)
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French Economy Minister Bruno Le Maire retained his post in a shuffle by President Emmanuel Macron of his government on Monday.
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Household consumption in Mexico fell 19.7% in April from March and 22.3% from a year earlier as the first full month of shutdowns over the coronavirus put the brakes on demand for goods and services, statistics institute Inegi 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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