Fed Observations, China Banking Stress, BOE Bond Option: Eco Day

(Bloomberg) -- Welcome to Thursday, Asia. Here’s the latest news and analysis from Bloomberg Economics to help you start the day:

• The U.S. economy showed signs of progress but continued to struggle amid the ongoing pandemic, according to a new Fed report
• Warning signs are flashing for China’s $45 trillion banking industry, just when Beijing needs it to keep the economy on its recovery path. Bad debt has hit a record and capital buffers are eroding
• The Bank of England can significantly increase the speed and volume of its bond purchases if needed, according to deputy governor Dave Ramsden. Meanwhile, BOE policy maker Gertjan Vlieghe warned that it’s a “terrible idea” to look at gold prices as a predictor of inflation
• National polls show Joe Biden with sizable leads over President Donald Trump
• India banned over a hundred Chinese apps as tensions escalated over the nations’ disputed border
• Australians have salted away cash they’ve been unable to spend on leisure due to the Covid lockdown and paid down debt, leaving them well placed to drive a recovery once the virus is contained
• What’s the cost to long-term growth of U.S.-China decoupling? Tom Orlik and Björn van Roye see a bilateral breakdown as being more expensive for China than the U.S., but not a complete catastrophe. The real nightmare for President Xi Jinping would be if the U.S. persuaded its allies that they should break off relations as one
• Chancellor Angela Merkel said tests showed “unequivocally” that Russian opposition leader Alexey Navalny was poisoned by a military-grade novichok nerve agent, dramatically escalating tensions with the Kremlin and sending the ruble tumbling
• Italy, Europe’s weakest link, is set to become more of a problem, writes David Powell
• The September Beige Book, released two days before the August payrolls report, provided critical information about the state of the U.S. labor market in the month, writes Eliza Winger
• Central bank President Roberto Campos Neto said Brazil must resume fiscal austerity following this year’s record pandemic spending, or risk being punished by financial markets. So much Covid cash was handed out, that poverty is nearing a record low
• Australia, the most China-reliant economy in the world, is bracing for further disruptions to its commodities sector amid tensions with Beijing that’ve already jolted beef, wine and barley producers

©2020 Bloomberg L.P.