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    Germany could take further public stakes in companies: minister

    Shareholders backed a 9 billion euro government bailout last month, securing the future of Germany’s flagship carrier after it was brought to the brink of collapse by the travel slump caused by the pandemic.In an interview with Saturday’s Frankfurter Allgemeine newspaper, Altmaier said: “We’re talking about perhaps a few dozen cases. In these very limited number of cases we will use the possibilities offered by the economic stabilisation fund, including taking a stake where appropriate.”It was also possible that the state would buy into other strategically important companies, like vaccine maker CureVac, in that case fending off an attempt by the United States government to buy it.”I’ve always made it clear that state stakes must be an absolute exception,” he added.On the airline group, which this week announced plans to cut 20% of its leadership positions and 1,000 administrative jobs, Altmaier said the government would not stand in the way of lay-offs.Turning to another major company in which Germany holds a large stake, Altmaier said a decision on the 15% stake in Commerzbank (DE:CBKG) it took to ward off its collapse during the financial crisis would be made next year. More

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    Comic: Federal Reserve Stimulus Drives Wall Street Towards All-Time Highs – Stocks on Wall Street notched their second weekly gain in a row as the economy continues to recover from the Covid-19 pandemic.The Dow Jones Industrial Average rose 1% for the week while the S&P 500 jumped 1.8% in the same time period.The tech-heavy Nasdaq Composite, meanwhile, climbed 4% on the week to end at another record high, boosted by gains in Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX).Stocks have rallied sharply in recent months, with all three benchmarks up more than 40% from their lows set on March 23 – when coronavirus-related lockdowns shocked the stock market – as a barrage of stimulus from the Federal Reserve stoked risk appetite.The U.S. central bank slashed interest rates to zero and rolled out around $2 trillion in stimulus to support the economy in the wake of the coronavirus crisis.However, many market experts have warned the rally could be tested with the start of the second-quarter earnings season on Wall Street next week.JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) report their results on Tuesday, followed by Goldman Sachs (NYSE:GS) on Wednesday.Thursday will see Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) report their results, with Netflix then due after the closing bell.To see more of’s weekly comics, visit: More

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    Chinese banks must brace for surge in bad loans, regulator says

    China’s Banking and Insurance Regulatory Commission said in a statement that profit growth would slow sharply at some banks while others could see profits decline.If banks were to make the minimum amount of provisions for their non-performing loans, which some have yet to do, profits for the sector would fall by more than 350 billion yuan ($50 billion), the statement said.Data from the commission shows that Chinese commercial banks booked 2 trillion yuan in profits in 2019, up 8.9% from a year earlier.Outstanding non-performing loans in the sector totalled 3.6 trillion yuan as of end-June, while the bad loan ratio rose to 2.10%, 0.08 percentage points higher than the beginning of the year, the statement said.Small firms have been allowed to delay loan and interest payments and the central government has called on the country’s financial institutions to sacrifice 1.5 trillion yuan in profits this year to help counter the economic impact of the virus on companies.Beijing has also allowed local governments to use the proceeds of special bonds to replenish the capital of certain small banks.The regulator warned of illegal fund flows into real estate and the stock market, and of renewed risks in the shadow banking sector without elaborating.It also vowed to strengthen regulation of capital flows and crack down on speculation in the financial sector to prevent asset bubbles. More

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    US heads for fiscal cliff as stimulus fades

    Peter Griesar, the founder of Brazos Tacos in downtown Charlottesville, Virginia, was so disturbed this week that the US might rein in its fiscal stimulus as the pandemic continued to rage that he fired off a tweet from his restaurant’s account.
    The $600 per week emergency jobless benefits helping millions of Americans — and some 10 to 15 of his former employees — to stay financially solvent were not a “disincentive to work”, he wrote. The payments, which are due to expire this month if Congress does not act, were needed because of “demand suppressed” by coronavirus.
    “We don’t see that changing for the rest of the year. Extend it,” he wrote, tagging Virginia’s two Democratic senators and the area’s Republican member of the House of Representatives.

    Mr Griesar’s lament is echoed by many US economists, who decry Washington’s failure to renew the jobless benefits. These payments have been pumping about $18bn per week into the world’s largest economy since the crisis began. According to a study by economists at the University of Chicago and the National Bureau of Economic Research released this week, the unemployment support has even exceeded prior earnings for 68 per cent of workers, and doubled them for the lowest-wage workers.
    While Democrats have pushed to maintain them until the economy improves, the White House and Congressional Republicans are resisting on the grounds that they discourage employment. The stand-off risks creating a dangerous economic cliff unless it is soon resolved.

    Ernie Tedeschi, an economist at Evercore ISI, said jobs growth could “slow materially over the summer”, to the tune of 500,000 or 1m fewer positions between August and October, if the support is withdrawn.
    “That wouldn’t flip the US from positive to negative growth if the recent pace of performance kept up, but it would be a big drag on activity in the third quarter in any event. And if Covid cases and reclosures continue to rise, unemployment [benefit] expiration would make a bad situation even worse,” he said.
    The pain from the potential end of the unemployment benefits will be compounded by the disappearance of other elements of the $3tn in stimulus that was rapidly approved in March when the coronavirus crisis first hit the US. The impact of $1,200 cheques sent by the US Treasury to individuals earning less than $75,000 per year early in the crisis has dwindled. In addition, small businesses that received forgivable loans as part of a $520bn aid programme from the Trump administration will have spent a significant chunk of the money. Meanwhile, states and local governments that never received much support in the first round of stimulus, and are starting their fiscal years with gaping budget shortfalls, are pondering their own austerity measures, including temporary lay-offs or dismissals of public workers and tax rises.
    Jay Shambaugh, an economics professor at George Washington University in the US capital, said that the massive stimulus enacted by the US in response to the crisis had sustained household incomes — and helped preserve spending — in recent months, but all that was now in peril.

    “July will be lower than June [in terms of personal income] because we’ll be totally done with the direct cheques. But then August is going to be much much lower, unless they do something else [on jobless benefits],” he said.
    “With rising infections and caseloads out there, and reopening scaling back in parts of the country, it seems that there’s a very good case to be made that the economy needs continued support,” said Mr Shambaugh.

    After data on Thursday showed that 1.3m Americans were still applying for the first time for jobless benefits last week, Chris Rupkey, chief financial economist at MUFG, warned: “Washington better get its act together and inject some more fiscal stimulus monies into the economy or business and economic activity could sink back closer to those crushing record lows made back in April.”
    A compromise could still be in reach on Capitol Hill. But while Democrats are pushing for a wide-ranging package worth an additional $3tn, White House officials and congressional Republicans have suggested a more modest amount, worth $1tn, that could struggle to meet all the needs. The unemployment benefits may not end entirely but could be slashed, and some Republicans are suggesting that the income threshold for receiving a new round of stimulus cheques could be lowered to $40,000. “There’s a lot still to do and $1tn puts constraints on what’s possible,” said Mr Tedeschi.
    Even senior Fed officials — who are normally reluctant to weigh in on decisions for Congress and the White House — have expressed concerns about waning fiscal stimulus.
    “When the relief was passed initially, there was a thought about how long this was going to last, and as more information has come in, there’s reason to suggest this is going to last longer than that,” said Raphael Bostic, president of the Atlanta Fed, in an interview with the Financial Times.“It’s only natural, given that possibility, to start thinking about what the next relief package should look like.”
    As well as hitting consumer spending, the withdrawal of fiscal stimulus could also make it harder for low and middle-income families struggling because of the pandemic to pay rent and mortgages, damaging the housing market. The Trump administration has extended a moratorium on evictions and foreclosures introduced during the coronavirus crisis that was originally set to end last month, but only until the end of August. That is yet another economic cliff on the horizon.

    Speaking to the FT, Mr Griesar of Brazos Tacos — whose business is generating about half of its pre-pandemic income from take-out orders only — worried about exactly this scenarios for some of the workers whose jobs he was forced to cut. “A lot of the people who work for me are young, and they live in houses with other people, who have also lost their jobs. So there could be cascading effects across households, where enough people have lost income that it becomes hard for them to make rent,” he said.
    But his biggest disappointment is that the “amazing experiment” placing billions of dollars into the hands of people who “wouldn’t otherwise have it” was ending prematurely. “We’re really lucky to have the parts of the economy that we still do in place. A lot of that was because of this [stimulus] money,” Mr Griesar said.
    Winding it down did not benefit anyone, he added. “It doesn’t help Trump to destroy the economy right before an election, it doesn’t help the Democrats either, I don’t think, because why would you want that to happen? There’s no upside”. More

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    Indian economy's medium-term outlook remains uncertain – RBI Governor

    NEW DELHI (Reuters) – The medium-term outlook for the Indian economy remains uncertain with supply chains and demand yet to be restored fully while the trajectory of the coronavirus spread and the length of its impact remain unknown, Reserve Bank of India Governor Shaktikanta Das said on Saturday.According to most estimates, the Indian economy will register a record contraction of over 4.5% in the current fiscal year that started on April 1 due to the pandemic.Starting late March, the country was placed under one of the strictest lockdowns in the world for over two months. Since early June, the government has started easing restrictions to help some revival in the economy even though the number of infections in the country continues to rise.”The Indian economy has started showing signs of getting back to normalcy in response to the staggered easing of restrictions,” Das said in an address to an online forum.”It is, however, still uncertain when supply chains will be restored fully. How long will it take for demand conditions to normalise and what kind of durable effects will the pandemic leave behind on our potential growth?” he said.Das said that the 2008 global crisis and the current crisis show that such economic shocks have “fatter tails” than generally believed, and that the country’s financial system should have larger capital buffers.A recapitalisation plan for Indian banks is necessary as the economic impact of the pandemic may result in higher bad loans and erosion of capital for banks, the RBI governor added.The central bank has cut policy rates by 115 basis points in response to the pandemic, resulting in a total policy rate reduction of 250 basis points since February 2019, along with providing liquidity of 9.57 trillion rupees ($127.28 billion).It has also eased some bad loan provisioning norms and allowed loan moratoriums for retail customers.Das said that the central bank has to carefully unwind the unusual monetary and regulatory measures taken to cushion the economic shocks in the post pandemic world, as the financial sector should return to normal functioning without relying on the regulatory relaxations as the new norm.India recorded 27,114 coronavirus cases in the last 24 hours, taking the total to 820,915 including 22,123 dead.The RBI governor also said that inflation will continue to moderate going forward and investment activity will revive. More

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    U.S. slaps French goods with 25% duties in digital tax row, but delays effective date

    WASHINGTON (Reuters) – The Trump administration on Friday announced additional duties of 25% on French cosmetics, handbags and other imports valued at $1.3 billion in response to France’s digital services tax, but would hold off on implementing the move for up to 180 days.The U.S. Trade Representative’s office said delaying the start of the tariffs would allow further time to resolve the issue, including through discussions in the Organisation for Economic Co-operation and Development (OECD). The decision also reflected France’s agreement to defer collection of its 3% tax on digital services.The U.S. move follows a U.S. Section 301 probe, which concluded the French tax discriminates against U.S. tech firms such as Google (O:GOOG), Facebook (O:FB) and Apple Inc (O:AAPL).France and other countries view digital service taxes as a way to raise revenue from the local operations of big tech companies which they say profit enormously from local markets while making only limited contributions to public coffers.U.S. Trade Representative Robert Lighthizer first disclosed on Thursday plans to impose new tariffs on French goods with deferred implementation. The $1.3 billion worth of goods is part of a list first published by USTR in December.The United States has initiated similar Section 301 investigations of digital services taxes adopted or being considered by 10 other countries, including Britain, India and Turkey, which could result in tariffs against their goods.OECD talks aimed at developing a multilateral solution for taxing digital services have failed to produce any results, with negotiations complicated by the coronavirus pandemic.Last month, U.S. Treasury Secretary Steven Mnuchin caught European countries by surprise when he suggested a pause in the OECD talks given the lack of progress there.A spokesman for the European Union told Reuters earlier that Brussels could propose its own solution if the OECD talks failed to produce an agreement. He urged Washington to resume the talks. More

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    IIF unveils new legal tool to ease G20 debt relief process

    WASHINGTON (Reuters) – The Institute for International Finance on Friday released a legal tool aimed at helping some of the world’s poorest countries take advantage of a suspension of debt payments offered by the Group of 20 major economies.The IIF, which groups more than 450 banks and other global financial institutions, said it developed the template waiver letter at the request of U.N. officials and others who are worried the pandemic could spark a major debt crisis.The G20 countries and the Paris Club of official creditors in April agreed to freeze debt payments from the 73 poorest countries for the rest of 2020 to free up funds to contain the pandemic and mitigate its economic fallout.Forty-one countries have expressed interest in the G20 Debt Service Suspension Initiative (DSSI), but the Paris Club has signed agreements with just under half of them so far, including Ivory Coast, Ethiopia and Pakistan.Some countries have been reluctant to participate out of concern that doing so could trigger an automatic “event of default” on their private sector debts, even if the freeze only affects official bilateral debt payments.Many private sector loans include terms that allow creditors to declare a default if circumstances – such as payments to official creditors – change. Private sector lenders have said they would be willing to waive those clauses on a case-by-case basis, but borrowers would need to request such a step.The IIF letter will speed up that process by giving borrower countries a legal template they can adapt to ask commercial creditors to waive the possibility of a default, said IIF Managing Director Sonja Gibbs.”It allows borrowers to ask their official bilateral creditors for this debt service suspension without triggering an event of default,” she said. More

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    U.S. loosens export curbs on gun silencers

    The industry has lobbied the government since 2017 to allow the sale of firearms sound suppressors to individuals in other countries, not just foreign militaries and police.”Effective immediately, the Department of State has rescinded its April 18, 2002, firearms sound suppressor policy,” according to the State Department website.The new guidance followed an interagency review started in 2017 that “addresses the concerns from U.S. companies they were losing potential sales to foreign manufacturers of firearms sound suppressors,” a department spokesman said in an email.Silencers will now be able to be licensed and exported like any other weapon on the U.S. munitions list which includes satellites and nuclear weapons.The State Department said all silencer export licenses would be reviewed on a case-by-case basis. More