US Briefing - Tuesday 30.06
Headlines
  • Fed’s Powell: Economy Is Facing New Challenges From Covid-19
  • US Covid-19 Cases Rise 1.2% Below 1 Week Avg Of 1.6%
  • NJ Gov Hits ‘Pause’ On Indoor Dining; NY Mulls The Same
  • US Halts Some Hong Kong Trade Benefits Over China Law
  • China Passes HK National Security Law Risking US Anger
  • China Manufacturing PMI Expands Further In June Beats Estimates
  • BoJ Widens Buying Ranges For JGBs Up To 10-Years For July
  • German Infection Rate Holds Below Key Threshold, Cases Steady
  • BoE's Haldane: Risks To Economy Remain Considerable, 2 Sided
  • UK Q1 Final GDP Revised Down To -2.2% Q/Q; Spain In-Line
  • UK PM Johnson Pledges 'New Deal' To Build Post-Covid-19
  • UK's Leicester Lockdown Tightened As Covid-19 Cases Rise
  • Australia's Victoria Imposes 4-Week Lockdown in Hotspot Suburbs
  • Gold Heads For Biggest Quarterly Gain Since 2016 On Virus Woes
  • Micron, Xilinx Give Bullish Revenue Forecasts; Shares Surge
  • Wells Fargo To Cut Dividend As Top Rivals Maintain Payouts
  • Shell To Writedown Up To $22B As Covid-19 Hits Big Oil
  • BNP Leads French Banks Pushing ECB To Allow Dividends In Q4
Commentary
Powell, Mnuchin Enter Lion's Den Again To Discuss Pandemic

US lawmakers on Tuesday will get another chance to grill the heads of the Federal Reserve and Treasury over the effectiveness of the nearly $3 trillion in emergency aid doled out to stem the economic fallout from the novel coronavirus pandemic.

 

The U.S. central bank, with Treasury's backing, has launched programs to improve the flow of credit as economic activity cratered and millions of jobs were lost, including its new Main Street Lending Program for mostly medium-sized businesses.

 

Treasury has been at the forefront of the $660 billion forgivable-loan Paycheck Protection Program (PPP) aimed at keeping small businesses afloat and their employees on payrolls. Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin are due to testify before the U.S. House of Representatives Financial Services Committee at 12:30 p.m. EDT (1630 GMT) to discuss how funds were disbursed to households and businesses.

(Reuters – Continue Reading)

Wells Fargo To Cut Dividend As Top Rivals Maintain Payouts

Wells Fargo & Co. plans to cut its dividend, breaking with all of the biggest Wall Street banks, after the Federal Reserve last week set new restrictions on the payouts.

 

“There remains great uncertainty in the path of the economic recovery and though it’s difficult to accurately predict the ultimate impact on our credit portfolio, our economic assumptions have changed significantly since last quarter,” Chief Executive Officer Charlie Scharf said Monday in a statement.

 

JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley left their third-quarter payouts unchanged, according to statements from those banks. A reduction by Wells Fargo was widely expected after the Fed said it would restrict payouts using a formula based on earnings, which have plunged at the San Francisco-based bank in recent quarters partly on legal costs tied to multiple scandals.

(Yahoo Finance – Continue Reading)

UK Final Q1 GDP Reaction

This morning’s National Accounts release shows that the UK economy is now thought to have contracted 2.2% in Q1. In the scale of the overall fall, this was a relatively modest revision from the 2.0% decline initially estimated. However, this now means that the Q1 decline is the joint-largest drop in output since Q3 1979. Further historical revisions were moderately positive, resulting in growth for 2019 as a whole being revised up by 0.1 percentage points to 1.5%.

 

In terms of the monthly profile, the ONS now estimates that there was a sharper GDP decline of 6.9% in March rather than the 5.8% previously. While we will have to wait until 14 July for a detailed breakdown of this, an indicative path provided by the ONS suggests that both services and industrial production suffered more pronounced declines of 7.5% (prev. 6.2%) and 4.3% (prev. 4.2%) respectively. Conversely, construction output appears to have experienced a more modest drop of 5.4% (prev. 5.9%).

 

On the expenditure front, household consumption is now estimated to have suffered a contraction of 2.9% in Q1. This is 1.2 percentage points more severe than previously estimated and represents the largest decline for over 40 years. Underlying purchasing patterns remained consistent with the restrictions of the lockdown, with decreased spending being recorded on clothing and footwear, transport, restaurants and hotels. However, this meant that households have built up a cash buffer, with the saving ratio climbing from 6.6% to 8.6%. It last stood higher at 8.9% in Q1 2016, before the EU referendum in June that year.

(Investec Securities – Continue Reading)

EZ Inflation Edges Higher, Remains Well Below ECB Target

Annual consumer price growth in the Eurozone increased in June on higher costs for energy, but the core rate eased, leaving both well below the European Central Bank’s target of near but below 2pct as the Covid-19 crisis on the Continent abates.

 

Preliminary headline inflation in the euro area rose to an annual rate of 0.3pct in June to surpass the market estimate of 0.2pct and the 0.1pct reading in May, the European statistics office Eurostat said Tuesday. The uptick followed oil prices higher. Futures for West Texas Intermediate (WTI) crude turned negative in April but were more than $7 higher on Monday than at the end of May.

 

The Eurozone’s preliminary core inflation rate slipped to 0.8pct as expected, down from 0.9pct last month. Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “A rebound in energy inflation, to -9.4pct from -11.4pct in May, was the primary driver of the small increase in the headline, offsetting a dip in inflation of food, alcohol and tobacco.

(LiveSquawk – Continue Reading)

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