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World News

North Korea says no need to sit down with U.S. for talks

SEOUL (Reuters) – North Korea does not feel the need to have talks with the United States, which would be nothing more than “a political tool” for Washington, a senior North Korean diplomat said on Saturday, ahead of a U.S. envoy’s visit to South Korea.

Vice Foreign Minister Choe Son Hui said negotiations would not work out between Washington and Pyongyang and there will be no change in North Korea’s policy.

“We do not feel any need to sit face to face with the U.S., as it does not consider the DPRK-U.S. dialogue as nothing more than a tool for grappling its political crisis,” Choe said in a statement carried by state-run KCNA news agency.

DPRK stands for the Democratic People’s Republic of Korea, North Korea’s formal name.

U.S. Deputy Secretary of State Stephen Biegun is due to visit South Korea next week to discuss stalled talks with North Korea.

South Korean President Moon Jae-in said on Wednesday that U.S. President Donald Trump and North Korean leader Kim Jong Un should meet again before the U.S. elections in November, which would help resume the stalled nuclear negotiations.

Trump’s former national security adviser, John Bolton, told reporters in New York on Thursday that the president might seek another summit with Kim as an “October Surprise” ahead of the election.

Trump and Kim Jong Un met for the first time in 2018 in Singapore.

They met again in Vietnam in 2019, but the talks fell apart when Trump said Kim had failed to offer enough nuclear weapons or ballistic missiles in exchange for lifting international sanctions.

At their third meeting, in June 2019 at the demilitarized zone separating the two Koreas, the two agreed to restart negotiations. Working-level talks between the two sides in Sweden in October were broken off.

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Politics

Senator warns of political pressure on U.S. probe into hackers of green groups

WASHINGTON (Reuters) – A Democratic U.S. senator says he has written to Attorney General William Barr outlining his concerns about potential “political interference” by the Trump administration in an investigation of a private espionage firm that targeted environmental groups in the United States.

Last month Reuters reported here that U.S. law enforcement was investigating aspects of a seven-year-long hack-for-hire operation carried out by a New Delhi-based firm called BellTroX InfoTech Services on behalf of unknown clients.

Senator Sheldon Whitehouse, who sits on the Senate Judiciary Committee, said in a letter to Barr and in an interview with Reuters on Thursday that the investigation was being carried out by prosecutors in New York and that unnamed sources had alerted his office that the Department of Justice has taken what he said was “an interest in this matter which seems inconsistent with ordinary procedure.”

Whitehouse declined to provide details or identify his sources, saying only that they had “first-hand knowledge of the matters under investigation.”

Whitehouse said he believed the interest was inconsistent with the independence of the U.S. attorney’s office in Manhattan and raised the possibility that the case “will fall victim to political pressure from Washington.”

The Department of Justice, the White House, and the U.S. attorney’s office in New York did not respond to messages seeking comment. BellTroX owner Sumit Gupta didn’t respond to repeated messages seeking comment. In previous conversations with Reuters, he denied wrongdoing.

In last month’s story, Reuters reported that among the organizations BellTroX targeted were environmental groups that have campaigned against the oil and gas industry – including Greenpeace, the Climate Investigations Center, and the Union of Concerned Scientists.

Whitehouse said that given both the influence he says the fossil fuel industry has wielded with Republican President Donald Trump’s administration and recent efforts to water down or reverse the prosecutions of Trump allies, he was right to be concerned that the targeting of green groups would not be properly looked into.

“The risk is obvious that the investigation will be slow-walked or curtailed to protect the President’s donors and allies in that industry,” Whitehouse said in his letter.

Whitehouse said he asked Barr to preserve any communications between his office and the U.S. attorney’s office in New York and provide a log of all contact regarding the BellTroX case.

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World News

U.S. envoy to visit South Korea to discuss stalled North Korea nuclear talks

SEOUL (Reuters) – The U.S. point man for North Korea is due to visit South Korea next week as it pushes for a resumption of talks with the North ahead of the U.S. election and despite few signs of any progress.

U.S. Deputy Secretary of State Stephen Biegun, who led working-level negotiations with the North Koreans, will be among several State Department officials holding talks with South Korean counterparts on Tuesday, a government official told Reuters, speaking on condition of anonymity as the trip has not been announced.

South Korean President Moon Jae-in has said U.S. President Donald Trump and North Korean leader Kim Jong Un should meet again before the U.S. election in November, and on Thursday, South Korea’s foreign minister said Seoul is pushing for a resumption of U.S.-North Korea talks.

Biegun has said there is time for both sides to re-engage and “make substantial progress”, but the coronavirus pandemic would make an in-person summit difficult before the November election.

Last month, North Korea abruptly raised tension with South Korea and blew up an inter-Korean liaison office, just on its side of the border, before just as suddenly announcing it would suspend plans for unspecified military actions against the South.

North Korea has repeatedly said it will not return to talks until the United States drops its “hostile policies”, including strict sanctions, and vowed not to provide Trump with another photo opportunity before the election without significant concessions.

“It’s hard to imagine a scenario where the North Koreans would be compelled to come back to the table unless the U.S. ‘offer’ was drastically different than it’s been in the past,” said Jenny Town, of 38 North, a think-tank focusing on North Korea.

“And even then, how credible would that be that it would survive a potential change in administration in the U.S.?

Trump and Kim met for the first time in 2018 in Singapore, raising hopes of an agreement to get North Korea to give up its nuclear weapons programme.

But their second summit, in early 2019 in Vietnam, fell apart.

Trump and Kim met again at the demilitarized zone separating the two Koreas in June 2019 and agreed to restart negotiations but working-level talks between the two sides in Sweden in October were broken off.

Trump’s former national security adviser, John Bolton, told reporters in New York on Thursday that the president might seek another summit with Kim as an “October Surprise” ahead of the election.

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World News

Pentagon criticizes Chinese military drills in disputed South China Sea

WASHINGTON (Reuters) – The U.S. Defense Department expressed concern on Thursday about China holding military exercises in the South China Sea, saying the move will further destabilize the situation in the disputed waters.

“Conducting military exercises over disputed territory in the South China Sea is counterproductive to efforts at easing tensions and maintaining stability,” the department said in a statement.

China announced last week it had scheduled five days of drills starting July 1 near the Paracel Islands, which are claimed by both Vietnam and China.

“The military exercises are the latest in a long string of PRC actions to assert unlawful maritime claims and disadvantage its Southeast Asian neighbors in the South China Sea,” the statement said, referring to the People’s Republic of China.

The United States accuses China of militarizing the South China Sea and trying to intimidate Asian neighbors who might want to exploit its extensive oil and gas reserves.

China claims 90% of the potentially energy-rich South China Sea, but Brunei, Malaysia, the Philippines, Taiwan and Vietnam also lay claim to parts of it, through which about $3 trillion of trade passes each year.

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Business

Dominican Republic eyes opportunities as U.S. firms adjust supply chains

WASHINGTON (Reuters) – U.S. companies are expanding and opening new plants in the Dominican Republic as they diversify their supply chains, moves that will help offset the economic impact of the new coronavirus pandemic, the Dominican economy minister said.

Juan Ariel Jimenez told Reuters he expected the Caribbean island nation to boost exports by 5 to 10% in 2021, aided in part by a rise in gold prices, as well as increased production of medical devices and equipment, a key growth sector.

Exports of medical and pharmaceutical products from Dominican free trade zones expanded nearly 4% from January to May, Dominican customs data show, and could expand by up to 10%, according to a survey of 34 companies active in the sector.

Two medical equipment makers, Florida-based Jabil (JBL.N) and the U.S. unit of Italy’s privately-held COSMED, began operations in the Dominican Republic in recent months, said Silvia Cochon of the Dominican National Free Zones Council.

Six others, including Medtronic (MDT.N), are expanding existing operations and adding new lines of business to their work in the Dominican Republic, she told Reuters.

Economy minister Jimenez said he is in talks with two to three additional large U.S. firms in the medical sector about new production facilities, but declined to name them. Positive decisions would add hundreds of millions of dollars to the current foreign direct investment level of over $5 billion, he said.

“We are seeing a lot of interest,” Jimenez said. He said the Dominican Republic was poised to benefit from a global shift to more regional supply chains, given its low labor costs, stable political situation, strong economic fundamentals, good transportation and logistics, and close proximity to the United States.

Many companies in the Dominican Republic, including apparel makers, have shifted gears to produce more N95 face masks and respond to a surge in demand.

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Business

Investors rethink yield curve control horizon as Fed raises doubts

NEW YORK (Reuters) – Investors are dialing back expectations that the U.S. Federal Reserve may soon move to implement yield curve control, with some of them welcoming skepticism from the central bank in considering such a move.

Federal Reserve minutes released on Wednesday showed serious questions were raised about the strategy. Some bond market players had become increasingly convinced that one of the Fed’s next moves would be to cap yields at a specific point on the curve, by buying 2- or 3-year maturities for example.

“The simple reason the Fed will be skeptical is that you are asking a central bank to embark on a very risky change in policy, and it’s not clear that where it has been attempted, it actually works,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley.

The Fed’s discussion has centered on whether to import the sort of long-term interest rate targeting currently used by the Bank of Japan (BOJ) and the Reserve Bank of Australia (RBA).

Various Fed members have talked about yield curve control the past couple of months. In May, Fed Vice Chair Richard Clarida and New York Federal Reserve Bank President John Williams said yield curve control could be a tool to complement forward guidance.

Yields on two-year, three-year, five-year and seven-year issues have fallen since the March stock market sell-off and since Fed officials started talking about yield curve control.

For a graphic on Yield control by stealth:

here

“I think there was a subset of market participants that saw (yield curve control) by September as a foregone conclusion,” said John Roberts at NatWest Markets, who added that the front-end of the U.S. Treasury curve “cheapened a bit following the release of the minutes, so it’s possible some were unwinding YCC trades”.

Analysts at Goldman Sachs said in a research note Wednesday that they no longer expect yield curve control to be introduced at the Fed’s September meeting, although they still expect the committee to recognize the policy as an option for the future in its framework review.

Fed officials did appear to favor crafting some promises about the future – in effect making a pledge not to raise rates until some goal is met.

“What they made very clear is (yield curve control) is not their first tool of choice, it is ahead of negative interest rates but behind explicit outcome-based forward guidance,” said Jason Ware, chief investment officer at Albion Financial Group.

Controlling bond yields by purchasing certain maturities of U.S. Treasuries would keep yields where the Fed desires and help keep credit and business lending rates low.

The expectation for yield curve control has come as the U.S. Treasury has greatly increased borrowing. It announced in May plans to borrow nearly $3 trillion in the second quarter, more than five times larger than the previous record, while the July-September quarter would see borrowing of $677 billion.

For a graphic on Monthly U.S. Treasury issuance by tenor:

here

Marvin Loh, senior global macro strategist at State Street Global Markets in Boston, said he would take yield curve control “off my plate for 2020 unless we really see yields rise,” adding that if yields in the 3-7-year part of the curve were to get “out of control, particularly given how much issuance the U.S. Treasury has been doing, then the market would wind up more concerned.”

Still, the focus on yield curve control has “basically meant that the Fed has already accidentally implemented it,” said Jon Hill, U.S. rates strategist at BMO Capital Markets, citing five-years yields hitting all-time lows on Tuesday.

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Business

U.S. job growth roars back, but COVID-19 resurgence threatens recovery

WASHINGTON (Reuters) – The U.S. economy created jobs at a record clip in June as more restaurants and bars reopened, but 31.5 million Americans were collecting unemployment checks in the middle of the month, and a resurgence in COVID-19 cases suggested the labor market could suffer a setback in July.

Record spikes in new coronavirus infections in large parts of the country, including Arizona and the highly-populated states of California, Florida and Texas, have forced several jurisdictions to scale back or pause reopenings, and send some workers back home.

The flare-up in the respiratory illness, which started in late June and hit bars and restaurants hard, was not captured in the Labor Department’s closely watched monthly employment report published on Thursday because the government surveyed businesses in the middle of the month.

“June may be the calm before the storm,” said Chris Rupkey, chief economist at MUFG in New York. “We cannot be sure the labor market recovery will continue at a speed that is sufficient to put the millions and millions of Americans made jobless in this recession back to work.”

Nonfarm payrolls surged by 4.8 million jobs in June, the most since the government started keeping records in 1939. Payrolls rebounded 2.699 million in May after a historic plunge of 20.787 million in April.

Economists polled by Reuters had forecast payrolls would increase by 3 million jobs in June. Still, employment is 14.7 million jobs below its pre-pandemic level. The jobs recouped are for workers who were temporarily unemployed.

President Donald Trump, whose opinion poll numbers have tanked as he struggles to manage the pandemic, economic crisis and protests over racial injustice four months before the Nov. 3 election, hailed the job gains as proof “our economy is roaring back.”

Though the second straight month of strong hiring added to a stream of data, including consumer spending, in suggesting that the recession which started in February was likely over, that is all history as the coronavirus rages.

Federal Reserve Chair Jerome Powell this week said the economic outlook “is extraordinarily uncertain” and would depend on “our success in containing the virus.”

Hiring last month was boosted by the typically low-paying leisure and hospitality industry, which brought back 2.1 million jobs, accounting for about two-fifths of the rise in payrolls.

The return of these workers pushed down average wages 1.2%. Companies are cutting wages and hours. The average workweek dropped to 34.5 hours from 34.7 hours in May.

The measurement of the unemployment rate continued to be biased downward by people misclassifying themselves as being “employed but absent from work” last month. The jobless rate fell to 11.1% from 13.3% in May.

Without the misclassification, it would have been 12.3%. The unemployment rate is 7.6 percentage points above its February level. Unemployment dropped for all gender and demographic groups, though joblessness stayed disproportionately high among Blacks and Hispanics. The number of people who have permanently lost their job increased 588,000 to 2.9 million.

Related Coverage

  • Amid strong June job growth, signs U.S. recovery may be stumbling
  • U.S. trade deficit widens as exports fall to lowest level since 2009

“These workers will likely struggle to regain employment in an economy facing suppressed demand,” said Beth Akers, senior fellow at the Manhattan Institute.

Stocks on Wall Street rallied, with the Nasdaq hitting an all-time high. The dollar .DXY edged up against a basket of currencies. U.S. Treasury prices were trading higher.

For a graphic on Rebounding from the COVID-19 crunch:

here

BROAD GAINS

Jobs also returned in the retail, education and health, manufacturing, construction, professional and business services sectors, transportation and warehousing, wholesale trade and financial activities sectors.

Local governments hired teachers and support staff. But state governments, confronting reduced revenues and stressed budgets caused by the pandemic, laid off more workers. There were further job losses in mining.

Hiring has been boosted by the government’s Paycheck Protection Program, which gives businesses loans that can be partially forgiven if used for wages. Those funds are drying up and many companies, including some not initially impacted by lockdown measures, are struggling with weak demand, forcing them to lay off workers.

That has triggered a second wave of layoffs, keeping weekly new applications for unemployment benefits extraordinarily high.

In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits fell 55,000 to a seasonally adjusted 1.427 million for the week ended June 27.

The claims report is the most timely data on the economy’s health. Including a program funded by the government, 2.3 million people filed claims last week.

The number of people receiving benefits after an initial week of aid rose 59,000 to 19.290 million in the week ending June 20. There were 31.5 million people receiving unemployment checks in mid-June, up 916,722 from the first week of the month.

With roughly a fifth of the workforce on jobless rolls, economists say the government should extend the extra $600 it pays per week in unemployment compensation when that benefit expires on July 31.

“Failure to take action would severely dent the chances of a rapid recovery,” said James Knightley, chief international economist at ING in New York.

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Business

Wall Street jumps on record payrolls surge

NEW YORK (Reuters) – Wall Street advanced on Thursday as investors headed into their long holiday weekend buoyed by a record payrolls jump, which provided assurance that the U.S. economic recovery was well under way.

All three major U.S. stock averages were more than 1% higher, with the S&P 500 set to post its fourth straight daily advance and the Nasdaq on course to reach a second straight all-time closing high.

Massive stimulus and hopes for a speedy economic rebound have returned the S&P 500 and the Nasdaq to about 7% and 12% below their record highs reached in February.

The indexes are all on track for solid weekly percentage gains.

The U.S. economy added 4.8 million jobs in June according to the Labor Department, 1.8 million more than analysts expected, setting a second consecutive record.

Massive rehiring sent the unemployment rate down to 11.1%.

“A lot of these numbers when you dig into the report – average weekly hours people are working, average hourly earnings … those things are just showing that we are getting back to work,” said Justin Hoogendoorn, head of Fixed Income Strategic Analytics at Piper Sandler in Chicago. “And that’s what’s going to allow the stock market to continue to perform well.”

Even with May and June’s consecutive record payroll gains, the labor market has still recovered only a fraction of the 22 million jobs lost in the March-April plunge.

The recovery of the U.S. economy, now in its sixth month of recession, could stall as new cases of COVID-19 hit record levels and several states hit hardest by the resurgence halted or reversed plans to reopen their economies.

On Thursday, Florida reported a record-shattering 10,000 new cases of the disease, worse than any European country reported at the peak of their outbreaks.

In the coming weeks, market participants will train their focus on second-quarter reporting season. In aggregate, analysts now expect S&P earnings to have dropped by 43.1% as companies grappled with plunging demand and disrupted supply chains.

The Dow Jones Industrial Average rose 298.31 points, or 1.16%, to 26,033.28, the S&P 500 gained 36.36 points, or 1.17%, to 3,152.22 and the Nasdaq Composite added 120.31 points, or 1.18%, to 10,274.94.

All 11 major sectors in the S&P 500 were trading in the black, with energy shares enjoying the largest percentage gain.

Microsoft Corp provided the biggest boost to the S&P 500 and the Nasdaq, and in June retained its top spot as the most globally invested stock, according to data from trading platform eToro.

Airlines, battered by pandemic-related travel restrictions, gained altitude. The S&P 1500 Airlines index was up 1.2%

Tesla Inc jumped 7.8% after the electric car maker’s second-quarter vehicle deliveries beat Wall Street estimates.

Advancing issues outnumbered declining ones on the NYSE by a 2.98-to-1 ratio; on Nasdaq, a 1.68-to-1 ratio favored advancers.

The S&P 500 posted 35 new 52-week highs and no new lows; the Nasdaq Composite recorded 115 new highs and 10 new lows.

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Business

Fed's Powell continued to talk frequently with Mnuchin, lawmakers in May

WASHINGTON (Reuters) – Federal Reserve Chair Jerome Powell continued to talk regularly with Treasury Secretary Steven Mnuchin and key U.S. lawmakers in May as the United States began to turn the corner on the economic fallout from the coronavirus pandemic, Fed records released on Thursday showed.

Powell and Mnuchin conducted 16 phone calls during the month, down from 21 in April, the readout of Powell’s calendar indicated, but still well above their usual frequency before the health crisis began to pummel the economy.

In addition, Powell held 20 calls with key U.S. lawmakers, six more than in April. The central bank chief appeared before the Senate Banking Committee in mid May as part of its oversight of how the Fed has handled implementing emergency support programs authorized by the CARES Act.

In coordination with the Treasury, the Fed has rolled out nearly a dozen programs to keep credit flowing to businesses and households.

More unusually, Powell spoke in May with the head of Turkey’s central bank as fallout from the pandemic was putting enormous pressure on the Middle Eastern country’s economy, and its currency.

Larry Fink, chief executive of BlackRock Inc (BLK.N), the world’s largest asset management company, spoke with Powell for the third consecutive month, the calendar also showed. The Fed has hired Blackrock to advise on some of its emergency facilities.

Despite his busy schedule, which stretched into some weekends, Powell also found a window of time for more glamorous pursuits, posing for TIME Magazine on May 13.

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Politics

U.S. House panel backs defense bill, Confederate battle looms

WASHINGTON (Reuters) – A U.S. House of Representatives committee unanimously backed a $741 billion defense bill late on Wednesday, setting the stage for a battle with President Donald Trump over naming military bases for Confederate generals and moving troops from Germany.

The House Armed Services Committee approved its version of the annual National Defense Authorization Act, or NDAA, by 56-0 shortly before midnight.

The bill sets policy for the Department of Defense on everything from how many ships are built to benefits for troops to how the country should counter threats from Russia and China.

Because it is one of the few bills Congress passes every year, lawmakers use the NDAA as a vehicle for a wide range of policy provisions.

The House version of the 2021 NDAA includes an amendment to remove the names of Confederate generals, who fought U.S. forces during the Civil War, from military bases within a year.

The Senate’s version of the NDAA includes a provision to change the names within three years.

Widespread protests over the treatment of Black Americans and bipartisan support in Congress make it likely that some version of the provision will remain in the NDAA as it moves through Congress.

After the House and Senate pass their versions, they will negotiate a compromise version of the bill, which both chambers must pass before it can be sent to Trump.

Trump has promised a veto, breaking with several of his fellow Republicans in Congress who favor changing the names. The House provision was introduced by Democratic Representative Anthony Brown and Republican Don Bacon.

The House NDAA also would make it more difficult for Trump to follow through on plans to reduce the number of U.S. troops stationed in Germany by barring their removal unless the Pentagon certifies doing so will not affect national security.

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