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    Philippine central bank says no reason for further rate cuts at this time, governor says

    The Southeast Asian nation, one of the fastest growing economies in Asia before the pandemic, suffered its first recession in 29 years as strict coronavirus lockdown measures ground economic activity to a halt in the second quarter.”This time, I do not see a strong reason why we should have another policy cut,” Bangko Sentral ng Pilipinas Governor Benjamin Diokno told ANC news channel.No more rate cuts for the entire year is “a possibility”, he added.The central bank’s policy-making body next meets on Aug. 20 to set key rates. More

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    Pelosi, Mnuchin open door to narrower COVID-19 aid through 2020

    WASHINGTON/Morristown, NJ (Reuters) – U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin on Sunday said they were open to restarting COVID-19 aid talks, after weeks of failed negotiations prompted President Donald Trump to take executive actions that Democrats argued would do little to ease Americans’ financial distress.Discussions over a fifth bill to address the impact of the coronavirus pandemic fell apart on Friday, a week after the expiration of a critical boost in unemployment assistance and eviction protections, exposing people to a wave of economic pain as infections continue to rise across the country.Trump on Saturday sought to take matters into his own hands, signing executive orders and memorandums aimed at unemployment benefits, evictions, student loans and payroll taxes.Trump told reporters in New Jersey before returning to Washington on Sunday that his suspension of the collection of the payroll tax could be made permanent. He said doing so would have no impact on Social Security because reimbursement would be made through the general fund.Trump, noting that Democrats want to resume stimulus discussions, said the White House would be willing to talk to them again “if it’s not a waste of time.”Joe Biden, the presumptive Democratic presidential nominee, called Trump’s orders a “series of half-baked measures” and accused him of putting Social Security, the government pension plan for the elderly, “at grave risk” by delaying the collection of payroll taxes that pay for the program.Trump’s move came as the number of U.S. cases of COVID-19 rose past 5 million. More than 160,000 Americans have died. Trump’s orders also raised questions about the legality of bypassing Congress’ constitutional powers to tax and spend.On Sunday, both Pelosi and Mnuchin appeared willing to consider a narrower deal that would extend some aid until the end of the year, and then revisit the need for more federal assistance in January. That would come after November’s election, which could rebalance power in Washington.”Let’s pass legislation on things that we agree on,” Mnuchin told Fox News in an interview. “We don’t have to get everything done at once. … What we should do is get things done for the American public now, come back for another bill afterwards.”Pelosi dismissed Trump’s orders as unconstitutional and “illusions” that would not quickly or directly help Americans. She said separately to “Fox News Sunday” that a deal between congressional Democrats and the White House was essential.”Right now, we need to come to agreement,” she said, adding that Democrats could shorten the length of time aid is provided in order to bring the bill’s costs down closer to the Trump administration’s proposal.”We could talk about how long our provisions would be in effect, so we can take things down — instead of the end of September of next year, a shorter period of time — and we’ll revisit all of it next year anyway,” said Pelosi, whose fellow Democrats control the U.S. House of Representatives.Mnuchin appeared open to consider the idea, telling Fox: “Anytime they have a new proposal, I am willing to listen.”$2 TRILLION GAPThe House passed a $3.4 trillion coronavirus support package in May that the Republican-led Senate ignored for weeks before putting forward a $1 trillion counteroffer.Democrats, pushing hard to keep a $600 per week unemployment benefit, which is a supplement to state jobless payments, and deliver more funds to cash-strapped states and cities battered by the pandemic, had offered to meet Republicans halfway to close the $2 trillion gap — a move the White House rejected.On Sunday, Mnuchin urged lawmakers to accept the money the administration was willing to lay out now to help schools reopen, boost local coffers and help the jobless, even if it fell short of Democrats’ goals.While it remained unclear whether there would be formal legal challenges to Trump’s orders, some legal and tax experts said his actions took few concrete steps to provide immediate relief.”It’s basically nothing,” Josh Blackman, a professor at the South Texas College of Law, said of Trump’s move directing his Cabinet to look at the issue of evictions.Trump’s memo on unemployment aid did not extend benefits under the current system, but instead authorized a separate system that would have to be paid for in part by the states, which are already struggling to pay benefits amid a wave joblessness not seen since the Great Depression.White House economic adviser Larry Kudlow told CNN on Sunday it was unclear how states would come up with the additional money, while Mnuchin on Fox said, “They can either take that out of the money we’ve already given them or the president can waive that.”Democratic New York Governor Andrew Cuomo, vice chair of the National Governors Association, said states cannot afford to pay 25% of unemployment costs as outlined by the president. “It’s simply impossible,” Cuomo wrote on Twitter.Trump’s memo calling on companies to defer withholding payroll taxes changed the deadline for when such taxes were due but did not eliminate them. It would rely on employers’ compliance and does not help Americans who are out of work.A fourth memo allowed borrowers to defer payments on student loans.Pelosi declined to say whether Democrats would challenge the legality of Trump’s actions in court. More

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    Fed's Evans says another coronavirus aid package 'incredibly important': interview

    Evans said it was up to U.S. lawmakers to protect small businesses and vulnerable communities with measures that ensure they can continue to pay their rent and buy food as long as the virus was not under control.”I think that public confidence is really important and another support package is really incredibly important,” Evans said on CBS’s Face the Nation program.He also said that the most pessimistic economic projections involved not supporting state and local governments, which in turn would have to implement drastic cuts to support some of the federal aid measures.Evans’ comments come after U.S. lawmakers failed to strike an agreement on a second aid package after weeks of negotiations, leaving tens of millions of unemployed Americans without direct federal support.U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin on Sunday said they were open to restarting COVID-19 aid talks.U.S. President Donald Trump on Saturday sought to take matters into his own hands, signing executive orders and memorandums aimed at unemployment benefits, evictions, student loans and payroll taxes. Some of his orders raised questions about the legality of bypassing Congress’ constitutional powers to tax and spend.Under Trump’s plan, unemployment aid would have to be partially funded by U.S. states, which have already struggled to pay benefits amid a wave joblessness not seen since the Great Depression. More

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    IMF willing to redouble Lebanon efforts, subject to reform commitment

    In a statement to an emergency donor conference for Lebanon, the IMF’s managing director, Kristalina Georgieva, laid out reforms expected, including steps to restore the solvency of public finances and the soundness of the financial system, and temporary safeguards to avoid continued capital outflows.Even before the massive explosion that killed 158 people and destroyed swathes of Beirut on Tuesday, a financial crisis had led Lebanon to enter negotiations with the IMF in May after it defaulted on its foreign currency debt. Those talks were put on hold in the absence of reforms.“We are ready to redouble our efforts. But we need unity of purpose in Lebanon — we need all institutions to come together determined to carry out much needed reforms,” Georgieva said.”Commitment to these reforms will unlock billions of dollars for the benefit of the Lebanese people. This is the moment for the country’s policymakers to act decisively. We stand ready to help,” she said.Georgieva also called on Lebanon to take steps to reduce the protracted losses in many state-owned enterprises and expand a social safety net to protect the country’s most vulnerable people.Lebanon’s financial crisis came to a head in October as capital inflows slowed and protests erupted over corruption and bad governance.Sunday’s donor conference raised pledges worth nearly 253 million euros ($298 million) for immediate humanitarian relief after the blast, the French presidency said, adding that those commitments would not be conditional on political or institutional reform.Pledges were also made for longer-term support that would depend on changes by the authorities. More

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    US stimulus debate, China inflation, UK growth figures

    The US stimulus debate is likely to roll on this week after Donald Trump signed four presidential orders over the weekend aimed at helping Americans cope with the economic fallout from the pandemic, following the collapse in talks with Democrats over a Congressional rescue package.
    The orders came as the US edged closer to becoming the first country to confirm 5m coronavirus cases.
    Beirut will continue to grapple with the aftermath of last Tuesday’s explosion, which killed more than 150 people, injured thousands and left about a quarter of a million people homeless.

    French president Emmanuel Macron called for an urgent aid effort on Sunday and warned that the future of Lebanon and the region was at stake.
    There have also been many protests directed at Lebanon’s entrenched political elite, who are seen as corrupt and incompetent and widely held collectively responsible for the explosion, and these could continue through the week.
    The flow of earning reports isn’t too frantic as the US earnings season pauses for breath ahead of the big retailers’ updates next week, but there’s still a good selection to watch out for from around the world with the pandemic once again the overriding factor.
    US inflation data and retail sales will be important in the week ahead, and there are also some key data points from China and a host of gross domestic product figures from Europe.
    On Monday the disruption to travel brought by Covid-19 is expected to weigh on Marriott International and Royal Caribbean Cruises.
    Occidental Petroleum reports the same day, when falling energy demand and the dive in oil prices is expected to take its toll. Investors will be on the lookout for any impairment charges and also any plans to pay down the debt it amassed in its blockbuster acquisition of Anadarko Petroleum last year.

    Supply chain constraints and weaker consumer spending will weigh on networking equipment maker Cisco Systems on Wednesday, but California-based chip and display equipment maker Applied Materials is confident a supply chain rebound will help it recover sales lost due to the pandemic and lead to revenue rises when it reports on Thursday.
    Nasdaq-listed Baidu, China’s leading search engine, also reports on Thursday, when advertising spending cuts are likely to hit revenues. 
    Elsewhere Apple supplier Foxconn briefs on second-quarter earnings on Wednesday when investors will look for updates on the impact to global tech demand and the Taiwanese group’s push to diversify supply chains.
    Deutsche Telekom reports on Thursday when fresh guidance is expected to take into account the takeover by US unit T-Mobile of smaller competitor Sprint.
    German industrial conglomerate Thyssenkrupp is expected to report a big third-quarter operating loss of about €1bn on Thursday. Investors will also look for any updates on how the beleaguered group intends to use the proceeds from the sale of its elevator division.
    And finally to the UK, where average room revenues will be in focus when Holiday Inn owner InterContinental Hotels reports on Tuesday after global travel came to a standstill during lockdowns.
    Holiday operator Tui reports on Thursday, when renewed quarantine measures and job cuts will be in focus.
    Investors will on Thursday wait to see if Ladbrokes-owner GVC has any plans to follow rival William Hill and shift focus away from shops after the pandemic lockdown accelerated a trend towards online gambling.
    Others to watch this week include Canopy Growth, Lyft, NetEase, DraftKings, National Express, Just Eat Takeaway, Bellway, SoftBank, Danish brewer Carlsberg, Domino’s Pizza, renewables group RWE and UK insurers Prudential and Admiral Group.
    Central banks
    A quiet week with none of the big-hitters in action. Policymakers meet in New Zealand on Wednesday, Egypt on Thursday and Peru on Friday, with all expected to keep rates on hold.
    Mexico is expect to cut its rate for the tenth meeting in a row on Thursday.
    Economic data
    Two key readings from China this week that should help to cast some light on how close the world’s second-largest economy is to a full recovery.
    First up on Monday is the official consumer price index, with economists surveyed by Bloomberg predicting year-on-year inflation of about 2.6 per cent for July. This contrasts to a jump above 5 per cent when lockdowns were imposed across the country early this year.
    However it is worth bearing in mind that pork prices have risen sharply due to swine fever and speculators have pushed corn futures up by 20 per cent since Covid-19 went nationwide in February. Both factors could help push the inflation gauge above expectations
    Retail sales figures due on Friday are expected to paint a mixed picture. The consensus forecast is for a rise of 0.2 per cent in July — ending a six-month run of contraction, but economists at Bank of America have pencilled in a year-on-year drop of 0.5 per cent.
    A big miss for retail sales could give policymakers in Beijing reason to reconsider their reluctance to deploy more serious stimulus measures during the pandemic fallout.
    Investors seeking greater insight into the health of the US consumer will receive two important data points on Friday — the retail sales report for July and the preliminary figures for the University of Michigan’s index of consumer sentiment for August.
    Economic activity had begun to stabilise as US states and cities started to slowly emerge from coronavirus lockdowns, but the emergence of virus hotspots across the nation since has forced many local officials to reverse their reopening plans.
    Disappointing figures on Friday would heap additional pressure on the Federal Reserve to act soon, turning investors’ focus to the upcoming meeting in mid-September.
    Further reading
    On Thursday initial claims for unemployment benefits for the week ended August 8 are due. Last week the number fell by 249,000 to a seasonally adjusted 1.2m.
    The UK has labour figures out on Tuesday and then on Wednesday the country looks set to suffer one of the biggest growth contractions in Europe for the second quarter, though this is partially explained by its smaller first-quarter fall.
    GDP readings are also due for the Netherlands, Finland, Denmark and in economies across eastern Europe including Russia, Poland and Ukraine. More

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    National budget rules to remain suspended next year, Brussels says

    EU restrictions on national budgets that were suspended because of the Covid-19 pandemic will not apply again until 2022 at the earliest, the EU’s economy chief has confirmed, as a resurgence in cases adds to an already very uncertain outlook.
    Brussels took the unprecedented step of activating an escape clause in the bloc’s budget rules in March, effectively suspending countries’ obligations to work towards the eurozone’s debt and deficit targets.
    European Commission president Ursula von der Leyen said at the time that the step was necessary to cope with “the human as well as socio-economic dimension” of the pandemic. 

    The rules, which were often broken, have nonetheless been part of the bedrock of the single currency since its inception, guiding discussions between Brussels and national capitals on how to mend their public finances — a process that became more structured in the wake of the eurozone sovereign debt crisis. 
    Valdis Dombrovskis, the executive vice-president of the European Commission who oversees financial services, told the FT that, while Brussels was planning to review the situation in the autumn, it was “relatively safe to assume” that the commission will not seek to reactivate the rules at that point “because the crisis continues, uncertainty continues”.
    In practice, this meant that national governments will prepare their budgets for 2021 on the basis that the rules are still in abeyance, he added. As a result the first national budgets that could potentially fall under the rules would be those of 2022.

    “Of course it’s all subject to how the real economic situation develops,” Mr Dombrovskis said. “We are still surrounded by very large uncertainty.”
    The reactivation of the escape clause depends on “when the condition of severe economic downturn is not in place any more”, he said. “We will have a review of this among other things in Spring 2021.”
    In July Brussels slashed its growth forecasts for the EU economy, warning that longer than anticipated coronavirus lockdowns in many countries would cause a “significantly” deeper recession this year than it had previously predicted. 

    The commission also lowered its forecast for a potential economic rebound in 2021, estimating growth of 5.8 per cent next year, down from a previous forecast of 6.1 per cent.
    Mr Dombrovskis noted that those forecasts were based on a scenario in which there was no major resurgence of Covid-19. But since then there has been a fresh uptick of coronavirus cases in a number of EU countries including Spain, Germany and Belgium. 
    “The current situation is relatively uncertain . . . we will need to see how the epidemiological situation develops,” he said. 

    Mr Dombrovskis also noted that the EU was in process of reviewing how the budget rules are enforced — an exercise delayed by the pandemic. While the rules are based around the core requirements for budget deficits to be smaller than 3 per cent of gross domestic product and public debt to be lower than 60 per cent of GDP, these basic tenets are surrounded by an evolving web of other requirements intended to ensure sound public finances.
    The European Commission’s guidebook on how to apply the rules runs to 108 pages. 
    Mr Dombrovskis said that a particular focal point of the review, launched in February, would be how to reduce reliance on metrics measuring the output gap between an economy’s performance and its potential, and its structural balance, a metric that tries to strip out the effects of the economic cycle when measuring a country’s deficit. 
    The commissioner said that there “seems to be consensus emerging” to move away from both measures on the grounds that they are overly complex, volatile and difficult to apply in a crisis.
    “So there is a scope for a simplification,” he said, noting that the European Fiscal Board, a group of experts tasked with monitoring the implementation of the rules, had already recommended the changes. 
    Another area being studied by the commission is the introduction of a limited golden rule that would exclude some specific growth-enhancing expenditure from assessments of whether countries are respecting agreed spending limits. More

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    The great trade unwinding

    TikTok is the go-to social media app for American teens, the place where they post their latest dance videos, slam dunks, or — in the case of those who used it to try to thwart US president Donald Trump’s June rally in Tulsa — conduct their political activism.
    It has also become the centre of the US-China decoupling story, one that began with equipment and chipmakers like ZTE and Huawei and is now centred on TikTok’s Chinese owner, ByteDance, which is being forced to sell the app to a US tech company, Microsoft.
    All of this supports the idea that technology trade and investment patterns are likely to shift in the future. So far, that story has mostly been more rhetoric than reality. Despite headlines about trade wars, between 2014 and 2017, only around 7 per cent of global trade routes shifted, according to a McKinsey Global Institute analysis of UN Comtrade data. But according to a new MGI report on supply chains, changes are likely to speed up dramatically.

    Thanks to myriad risks — from fractious politics to climate change and pandemics, or the growing number of cyber attacks and financial crises — shocks to global trade are becoming more frequent. Companies can now expect month-long disruptions to supply chains every 3.7 years. That means that over the course of a decade, companies can expect to lose the equivalent of 40 per cent of a year’s profits, the report says.
    MGI also estimates that up to 26 per cent of global goods exports, worth some $4.6tn, could move to new countries over the next five years. And that is a conservative estimate, based on what is economically feasible right now. Politics may, of course, force changes that are not in a country’s economic interests but instead represent the desires of electorates or autocrats.
    Part of this story is about a pendulum that swung too far over the last few decades toward concentration in supply chains, both geographically and economically. Hyper-concentration of low-value supply chains in Asia produced businesses that were efficient, but not necessarily resilient, particularly when hit by natural disasters or unexpected political events.
    Covid-19 has exposed the fragility that results when China and India produce the bulk of the world’s pharmaceutical ingredients. Indeed, the MGI report finds 180 key tradable products for which a single country accounts for more than 70 per cent of exports. Concentration is highest in mobile and communications equipment, one of the most politically contentious areas right now. It is also common in lower profile industries such as textiles and apparel.
    That underscores another development: we are now living in a world in which two superpowers with very different political and economic systems, the US and China, are both major producers and consumers. Rising wages in China have increased the buying power of Chinese consumers but also made it much more likely that production of lower-value goods such as furniture or clothing will move to other countries.
    At the same time, the rise of China and its ringfencing of strategically important areas, including the technology sector, have contributed to the inherent friction of having “one world, two systems”. That problem was then exacerbated by Mr Trump’s go-it-alone trade policies.

    Over the past 20 years, China has become a much richer country. It has not only got a huge industrial base, but also richer consumers who are increasingly buying homegrown brands — such as Xiaomi phones over Apple. When the US makes it tough for Chinese sellers to do business in America, they move elsewhere.
    One Chinese fintech group I spoke to recently, which serves more than 600,000 mostly small and midsized sellers in China, says that there has been a notable shift in client business, away from purchasers in the US over the past two years, and towards Europe, which now represents roughly half of trade flows on the platform. It is possible to imagine that two entirely separate consuming and producing ecosystems might emerge, one centred around the US, and another around China — even if getting there will be a painful and bumpy process.
    But trade is getting bumpier anyway. The MGI report notes that “as a new multipolar world takes shape, we are seeing more trade disputes, higher tariffs, and broader geopolitical uncertainty. The share of global trade conducted with countries ranked in the bottom half of the world for political stability, as assessed by the World Bank, rose from 16 per cent in 2000 to 29 per cent in 2018. Just as telling, almost 80 per cent of trade involves nations with declining political stability scores.”
    The tectonic plates of trade are shifting in ways that will reshape economics and politics. In the US, lawmakers from both parties are once again supporting industrial policy, a no-go area for decades, and advocating public intervention in private markets in strategic areas including semiconductors. In China, supply chains that once churned out cheap clothes and assembled devices to sell to richer consumers in the west are now increasingly serving domestic markets.
    In this sense, perhaps the biggest trade shift of all is the way in which the two superpowers are trading places.
    Follow Rana Foroohar with myFT and on Twitter More

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    Watch Now: Here's What Will Move Markets This Week – August 9 (Video) – Our senior markets analyst Jesse Cohen gives us his top five things to know in financial markets in the week ahead, including:- U.S. Retail Sales- U.S. Jobless Claims- U.S. Inflation Data- Earnings Season Winds Down- U.S.-China TensionsFollow us on Twitter: on YouTube: More