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May tells UK lawmakers to ‘hold nerve’ as date set for new Brexit vote

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Prime Minister Theresa May listens in the House of Commons, London.

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Prime Minister Theresa May listens in the House of Commons, London.

British Prime Minister Theresa May told lawmakers that the U.K. Parliament will get another chance to vote on her deal to exit Europe before the end of February.

May said if there is no deal by Tuesday 26 February, the government will make a statement to MPs on that day, and hold a debate on an amendable motion the following day.

In a statement to the House of Commons on Tuesday, May also asked for more time to negotiate with the European Union (EU).

“The talks are at a crucial stage. We now all need to hold our nerve to get the changes this House has required and deliver Brexit on time,” May said.

Following the speech, the main opposition Labour leader Jeremy Corbyn said May was “running down the clock” in a bid to force lawmakers to accept her deal.

May wants European counterparts to adjust the terms of the “backstop” that currently forms part of the Withdrawal Agreement. If that occurs, she could likely secure a majority in Parliament.

The backstop is an arrangement that acts as a means to prevent any hard border being erected on the island of Ireland between the Republic of Ireland which is staying In Europe and Northern Ireland which is part of the United Kingdom and is set to leave the EU.

Prior to the statement, the pound sat at 1.2861 versus the dollar and was largely unmoved as she spoke.

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English Premier League to restart on June 17, BBC reports

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Fans wear disposable face masks prior to the Premier League match between Burnley FC and Tottenham Hotspur at Turf Moor on March 07, 2020 in Burnley, United Kingdom.

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The Premier League season will restart on June 17, the BBC reported on Thursday.

A spokesman for the Premier League, which stopped play in March, declined to comment as the meeting of 20 club officials was ongoing.

The season will get under way on the Wednesday date with Aston Villa v Sheffield United and Manchester City v Arsenal, which are both games in hand.

A full fixture list would then be played on the weekend of June 19-21, the report said. All games will be behind closed-doors.

The Premier League was suspended on March 13 due to the coronavirus pandemic but teams returned to small group training last week.

On Wednesday clubs agreed to move to Phase Two of the comeback with players working in larger groups and closer to each other.

The next step would be full contact training and preparation for the return to action.

Liverpool, searching for their first league title in 30 years, lead the standings by 25 points.

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Weekly jobless claims reach 2.1 million, but total unemployed shrinks

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First-time claims for unemployment benefits totaled 2.1 million last week, the lowest total since the coronavirus crisis began though indicative that a historically high number of Americans remain separated from their jobs.

Economists surveyed by Dow Jones had been looking for 2.05 million. The total represented a decrease of 323,000 from the previous week’s upwardly revised 2.438 million.

Continuing claims, or those who have been collecting for at least two weeks, numbered 21.05 million, a clearer picture of how many workers are still sidelined. That number dropped sharply, falling 3.86 million from the previous week.

That decline in continuing claims “suggests that the reopening of states is pushing businesses to rehire some of the people let go when the virus hit,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. However, Shepherdson noted that some of the data, particularly from California, remains noisy and may not be an accurate representation of some states’ situations.

The insured unemployment rate, which is a basic calculation of those collecting benefits vs. the total labor force, came down sharply to 14.5% from 17.1% the previous week.

“Layoffs continue at a massive scale, according to the latest unemployment insurance report, but it may be that the job market is nearing a turning point,” said Gus Faucher, chief economist at PNC.

The four-week moving average, which helps smooth out weekly volatility, rose to 22.72 million, an increase of 760,250 from the previous week. 

Since the pandemic was declared in mid-March, 40.8 million have filed claims as social distancing measures aimed at containing the coronavirus outbreak resulted in much of the $21.5 trillion U.S. economy being in lockdown for 2½ months.

A separate report Thursday showed that first-quarter GDP contracted by 5%, while the Atlanta Fed’s GDPNow tracker is indicating a 41.9% plunge in Q2 that will be the worst in U.S. history. That would put the U.S. firmly in recession territory, though most economists are expecting a rebound in the second half of the year after restrictions are lifted.

A total 1.19 million filed claims through the Pandemic Unemployment Assistance program last week.

The high jobless numbers persist even as all states have reopened their economies to various extents. Las Vegas casinos will be resuming activities late next week, Disney resorts also have targeted July reopening dates and Los Angeles is allowing retail stores to resume business. Restrictions are likely to be loosened soon in New York as well.

Still, businesses are wrestling with multiple dynamics stemming from the biggest surge in in layoffs since the Great Depression. The Federal Reserve reported Wednesday that business owners are seeing workers reluctant to return to their jobs because of safety concerns, child-care issues and “generous” unemployment benefits from the government.

At the state level, Pennsylvania saw the biggest rise in claims last week with 6,892, according to numbers not adjusted seasonally. Many large states, though, saw declines from a week earlier Washington fell by 86,839, while California declined by 32,088 and New York decreased by 31,769.

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If Fed opts for negative rates, it will be a ‘Hail Mary’

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A woman walks past the U.S. Federal Reserve building in Washington D.C., the United States, May 21, 2020. U.S. Federal Reserve Chair Jerome Powell on Thursday said the COVID-19-induced economic downturn has inflicted acute pain across the country, noting that the burden is not evenly spread.

Ting Shen | Xinhua News Agency | Getty Images

Should the U.S. Federal Reserve opt to take its benchmark funds rate into negative territory, it will need to “go deeply negative” with a cut of between 50-100 basis points below zero, according to Standard Chartered Bank.

The Fed has unleashed an unprecedented barrage of monetary stimulus in a bid to shore up the U.S. economy against the economic impact of the coronavirus pandemic. However, Chairman Jerome Powell has denied that taking its benchmark overnight lending rate below zero is under consideration, despite pressure from U.S. President Donald Trump.

Speculation of negative rates has nonetheless persisted, and although not the bank’s base-case scenario, Standard Chartered analysts said in a note Wednesday that it could occur in the event of a disappointing economic rebound and exhaustion of other policy options. They suggested that if negative rates were to emerge as a last resort, the central bank would need to go deep.

“No one likes trying a ‘Hail Mary’ from midfield as the clock ticks down when you are losing, but you kick the ball a long way in that situation – there is no point to a short pass,” said Steven Englander, head of global G10 FX research and North American Macro Strategy at Standard Chartered.

Negative interest rates, as seen in the euro zone and Japan, effectively charge banks to hold money with the central bank in a bid to encourage them to lend and therefore stimulate the economy. However, both the euro zone and Japan have seen limited benefits since their implementation, which was before the coronavirus pandemic erupted.

Englander argued that while central banks often present breaching zero as akin to “crossing the Rubicon,” there is not necessarily a “non-linear” policy impact that would make edging from a small positive to a small negative a significant monetary policy maneuver.

“If cutting policy rates from 150bps (basis points) to 10bps was not enough to shock the economy into recovery, we (and we suspect the Fed) do not think that going from +10bps to, say -20bps would materially affect the outcome,” Englander said.

“We doubt that the Fed expects a small venture into negative territory would provide enough stimulus to offset the negative impact on banks lending and disruption of short-term money markets.”

Plunging dollar and negative yields

Englander suggested that dropping 50-100 basis points below zero would trigger a significant fall in yields on the benchmark 10-year Treasury note, along with easing debt-servicing pressures.

Standard Chartered analysts believe this would likely send Treasury yields to all-time lows across the curve, potentially taking the 10-year negative, especially since the policy action would likely be taken against a backdrop of a bleak economic outlook and rising deflation risks.

“Still, we would expect the move to be driven primarily by the real yield channel in response to the rate cuts and ongoing Fed U.S. Treasury buying,” he added.

Should the move to negative rates transpire, Englander anticipates a sharp fall in the U.S. dollar, with the timing of the drop dependent on the economic and asset market context.

“Negative rates could disrupt short-term money markets at first, so the initial response might be buying G10 safe havens, or even result in USD strength,” he said.

“Once the surprise element passed through the market, currencies with positive yield and muted fiscal policy should prosper.”

Meanwhile, gold would likely test all-time highs in this scenario, Englander projected, as negative interest rates would “lower the opportunity cost of holding gold.”

“Investors still appear to be under-allocated to gold, and negative rates could draw interest from retail to the official sector,” he added.

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