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Fed chairman: Coronavirus could hurt the global economy – CNN

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“We will be watching this carefully,” Powell testified before the House Financial Services Committee, where he delivered his semiannual report to Congress. “What will be the effects on the US economy? Will they be persistent? Will they be material? That’s really the question.”
Powell refrained from speculating about the potential economic impact of the coronavirus. But noted, “We know there will likely be some effects on the United States.”
In prepared testimony, Powell noted coronavirus could lead to disruptions in China that spill over to the rest of the global economy. He will testify again before the Senate Banking Committee at 10 am ET on Wednesday.
The outbreak of the coronavirus, which has now killed more than 1,000 people, has added uncertainty to the global outlook — and the US economy — as companies have shuttered plants and shifted supply chains to contain spread of the infectious disease.
In late January, Powell described the outbreak as a “very serious issue,” but at the time, he noted the virus was still in its early stages and it remained uncertain how far it would spread and what the macroeconomic effects would be.

Holding rates steady

Powell spent last year guiding the Fed to help buffer the US economy from turbulent trade tensions between the United States and China. The trade war led to weakness in the manufacturing sector, hurt business investment and slowed global growth.
The Fed slashed interest rates three times last year — in July, September and October — to a range of between 1.25% and 1.5%. Since then, Powell has signaled the central bank plans to take a wait-and-see approach for this year, a stance he once again reinforced in his testimony to lawmakers.
“The current stance of monetary policy will likely remain appropriate,” said Powell. Adding, “If developments emerge that cause a material reassessment of our outlook, we would respond accordingly.”
In his testimony, Powell sought to thread the needle of sending a reassuring message that the US economy is still in “a good place,” but that policymakers would act as needed to continue the longest-running expansion on record, now in its 11th year.

Low unemployment, but a ballooning deficit

The Fed chairman has routinely pointed to the country’s record low unemployment rate as a benefit to low-and middle-income families, who have been among the last to reap rewards from the economic expansion. He pointed to higher wages for those communities, particularly those with lower-paying jobs.
Even so, Powell cautioned that the country continues to face challenges, including drawing in more workers into the labor force, boosting productivity and reconciling with a ballooning federal deficit.
The renewed warning by Powell to Congress to get the nation’s fiscal house in order comes weeks after the nonpartisan Congressional Budget Office released its latest report, projecting that the deficit would widen over the coming decade, reaching a total of $1.7 trillion in 2030.
“Putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn,” said Powell. “A more sustainable federal budget could also support the economy’s growth over the long term.”
With interest rates at historic lows, the Fed’s ammunition to rescue the economy is diminished, requiring fiscal policies by Congress to help offset any economic weakness.
Powell’s testimony comes a day after the White House released President Donald Trump’s fiscal 2021 budget blueprint, which calls for deep cuts in safety net programs and projects a balanced budget by 2035 assuming the economy returns 3% economic growth annually.
That’s significantly higher than what most economists and the Federal Reserve forecast.

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G7 nations to boost climate finance

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G7 leaders agreed on Sunday to raise their contributions to meet an overdue spending pledge of $100 billion a year by rich countries to help poorer countries cut carbon emissions and cope with global warming, but only two nations offered firm promises of more cash.

Alongside plans billed as helping speed infrastructure funding in developing countries and a shift to renewable and sustainable technology, the world’s seven largest advanced economies again pledged to meet the climate finance target.

But climate groups said the promise made in the summit’s final communique lacked detail and the developed nations should be more ambitious in their financial commitments.

In the communique, the seven nations – the United States, Britain, Canada, France, Germany, Italy and Japan – reaffirmed their commitment to “jointly mobilise $100 billion per year from public and private sources, through to 2025”.

“Towards this end, we commit to each increase and improve our overall international public climate finance contributions for this period and call on other developed countries to join and enhance their contributions to this effort.”

After the summit concluded, Canada said it would double its climate finance pledge to C$5.3 billion ($4.4 billion) over the next five years and Germany would increase its by 2 billion to 6 billion euros ($7.26 billion) a year by 2025 at the latest.

There was a clear push by leaders at the summit in southwest England to try to counter China’s increasing influence in the world, particularly among developing nations. The leaders signalled their desire to build a rival to Beijing’s multi-trillion-dollar Belt and Road initiative but the details were few and far between.

Johnson, host of the gathering in Carbis Bay, told a news conference that developed nations had to move further, faster.

“G7 countries account for 20% of global carbon emissions, and we were clear this weekend that action has to start with us,” he said as the summit concluded.

“And while it’s fantastic that every one of the G7 countries has pledged to wipe out our contributions to climate change, we need to make sure we’re achieving that as fast as we can and helping developing countries at the same time.”

PLEDGE OVERDUE

Some green groups were unimpressed with the climate pledges.

Catherine Pettengell, director at Climate Action Network, an umbrella group for advocacy organisations, said the G7 had failed to rise to the challenge of agreeing on concrete commitments on climate finance.

“We had hoped that the leaders of the world’s richest nations would come away from this week having put their money their mouth is,” she said.

Developed countries agreed at the United Nations in 2009 to together contribute $100 billion each year by 2020 in climate finance to poorer countries, many of whom are grappling with rising seas, storms and droughts made worse by climate change.

That target was not met, derailed in part by the coronavirus pandemic that also forced Britain to postpone the U.N. Climate Change Conference (COP26) until later this year.

The G7 also said 2021 should be a “turning point for our planet” and to accelerate efforts to cut greenhouse gas emissions and keep the 1.5 Celsius global warming threshold within reach.

European Commission President Ursula von der Leyen said the G7 leaders had agreed to phase out coal.

The communique seemed less clear, saying: “We have committed to rapidly scale-up technologies and policies that further accelerate the transition away from unabated coal capacity, consistent with our 2030 NDCs and net zero commitment.”

The also pledged to work together to tackle so-called carbon leakage – the risk that tough climate policies could cause companies to relocate to regions where they can continue to pollute cheaply.

But there were few details on how they would manage to cut emissions, with an absence of specific measures on everything from the phasing out of coal to moving to electric vehicles.

Pettengell said it was encouraging that leaders were recognising the importance of climate change but their words had to be backed up by specific action on cutting subsidies for fossil fuel development and ending investment in projects such as new oil and gas fields, as well as on climate finance.

British environmentalist David Attenborough appealed to politicians to take action.

“We know in detail what is happening to our planet, and we know many of the things we need to do during this decade,” he said in a recorded video address to the meeting.

“Tackling climate change is now as much a political and communications challenge as it is a scientific or technological one. We have the skills to address it in time, all we need is the global will to do so.”

($1 = 1.2153 Canadian dollars)

(Reporting by Elizabeth PiperAdditional reporting by William James and Kate Abnett in Brussels and Andreas Rinke in BerlinEditing by William Maclean, Raissa Kasolowsky and Frances Kerry)

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Canadian dollar goes up from Friday’s 4-week low

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Canadian dollar

The Canadian dollar edged higher against its U.S. counterpart on Monday as oil prices climbed and investors looked past domestic data showing factory sales falling in April, with the loonie clawing back some of Friday’s decline.

Canadian factory sales decreased by 2.1% in April from March, Statistics Canada said. Still, sales were up 1.1% after excluding vehicles and parts.

“Zooming out from the disruptions seen in the auto industry, the outlook for manufacturing sales is not all that bad,” Omar Abdelrahman, an economist at TD Economics, said in a note.

“The reopening of provincial economies and strength in Canada‘s largest export market (the U.S.) should provide a lift to demand,” Abdelrahman added.

The price of oil, one of Canada‘s major exports, was supported by economic recovery.

U.S. crude prices rose 0.9% to $71.56 a barrel, while the Canadian dollar was trading 0.2% higher at 1.2143 to the greenback, or 82.35 U.S. cents. On Friday, it fell to its weakest since May 14 at 1.2177.

Speculators have cut their bullish bets on the Canadian dollar, the strongest G10 currency this year, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of June 8, net long positions had fallen to 45,281 contracts from 48,772 in the prior week.

A stronger Canadian dollar is usually seen hurting exporters, but the nature of the global economic recovery could help firms pass on their higher costs from the currency to customers, leaving exporters in less pain than in previous cycles.

Investors were awaiting a Federal Reserve policy announcement on Wednesday. Expectations that the Fed would stick to its dovish course have helped cap U.S. and Canadian bond yields.

Canada‘s 10-year yield touched its lowest level since March 3 at 1.365% before recovering to 1.381%, up 1.3 basis points on the day.

 

(Reporting by Fergal Smith; Editing by Bernadette Baum)

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Toronto stock exchange dips as losses in miners

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Toronto Stock Exchange

Toronto stock exchange index edged lower on Monday, as losses in mining stocks and dismal domestic manufacturing data overshadowed gains in energy stocks.

* The materials sector, which includes precious and base metals miners and fertilizer companies, lost 0.7% as gold futures fell 1.6% to $1,848.2 an ounce. [GOL/]

* Canadian factory sales slipped by 2.1% in April from March on lower sales of transportation equipment, as well as subdued petroleum and coal products sector, Statistics Canada said.

* At 9:43 a.m. ET (13:43 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was down 14.52 points, or 0.07%, at 20,123.83.

* The energy sector climbed 1.4% as U.S. crude prices were up 1% a barrel, while Brent crude rose 0.9%. [O/R]

* Financials slipped 0.3%, while industrials fell 0.1%.

* On the TSX, 120 issues were higher, while 107 issues declined for a 1.12-to-1 ratio favouring gainers, with a trading volume of 22.35 million shares.

* TSX’s top gainers were paper and packaging company Cascades Inc <CAS.TO> and IT firm Kinaxis Inc <KXS.TO>, jumping 4.1% and 4.0%, respectively.

* Biggest decliners were uranium producers Nexgen Energy Ltd <NXE.TO>, down 5.9%, followed by Cameco Corp falling 5.5%.

* The most heavily traded shares by volume were Canadian Natural Resources Limited <CNQ.TO>, BCE Inc <BCE.TO>, and Hut 8 Mining Corp <HUT.TO>

* Twenty-two stocks hit fresh 52-week highs on the TSX, while there were no new lows.

* Across all Canadian issues, there were 95 new 52-week highs and four new lows, with total volume of 43.57 million shares.

 

(Reporting by Amal S in Bengaluru; Editing by Rashmi Aich)

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