FinSys Update:Fed Fisher: GDP Likely Below 3% For Prolonged Pd

--Fed's Bullard: FOMC 'Extended Period' Lang Increases Deflation Risk

WASHINGTON (MNI) - The following are events and news reported Thursday ET related to the financial crisis and other top news in the global financial system:

* Economic growth is likely to remain below 3% for a "prolonged period," Dallas Federal Reserve President Richard Fisher said Thursday, with slow and "bumpy" improvement in jobs -- but without a second downturn. Fisher, speaking to the Greater San Antonio Chamber of Commerce, blamed excessive uncertainty about future government regulations for what he called the economy's "defensive crouch." On the overall recovery, Fisher repeated that growth "is no longer being aided by the inventory correction" and software and equipment purchases "are closer to catching up with demand." Weak manufacturing growth and a "dyspeptic housing sector" along with consumer anxiety "point to a slightly weaker national outlook." Growth from the first quarter on is "likely to fall below 3 percent for a prolonged period." [13:20 ET]

* In a research paper published Thursday, St. Louis Fed President James Bullard discussed the possibility that the U.S. economy may become enmeshed in a Japanese-style, deflationary outcome within the next several years. He concluded that the FOMC's extended period language may be increasing the probability of a Japanese-style outcome for the U.S., and on balance, the U.S. quantitative easing program offers the best tool to avoid such an outcome.

* China has rejected an International Monetary Fund staff assessment that the yuan is undervalued, arguing that the exchange rate is closer to its equilibrium rate than it's ever been. The IMF said that its staff "believe that the (yuan) remains substantially below the level that is consistent with medium-term fundamentals." However, the Chinese government "viewed the level of the (yuan) right now as much closer to equilibrium than at any time before," the report said. [09:00 ET]

* Initial claims for U.S. state unemployment benefits fell by 11,000 to 457,000 in the July 24 week after seasonal adjustment, according to data released by the U.S. Labor Department Thursday. In the July 17 week, continuing claims rose by 81,000 to 4.565 million. The unadjusted level fell by 12,920 to 4,564,922. [08:30 ET]

* Tenth District manufacturing activity rebounded moderately in July according to the Kansas City Federal Reserve Manufacturing Survey Thursday, and expectations for future production remained positive. However, plans for future hiring and capital spending were essentially flat. Price indexes were mostly unchanged. The net percentage of firms reporting month-over-month increases in production in July was 14, up from 3 in June and 5 in May. The increase in production occurred among both durable and nondurable goods producing plants, with the exception of aircraft producers, who reported a slight downturn.[11:00 ET]

* Working gas in storage was 2,919 Bcf as of Friday, July 23, 2010, according to estimates by the Energy Information Administration Thursday. This represents a net increase of 28 Bcf from the previous week. Stocks were 94 Bcf less than last year at this time and 239 Bcf above the 5-year average of 2,680 Bcf. [10:30 ET]

* Most sovereign issuers in the eurozone have made slower progress in funding their 2010 finance requirements than in 2009, debt agency data show. Despite the best efforts of debt agencies to frontload their 2010 issuance, the pace of this has failed to match the rush to issue government bonds in the first half of 2009. All 17 member states of the euro zone have now issued over 50% of their funding targets for this year. Ireland is in front, having issued 88% of its 2010 target, but most are behind the progress made by the end of July last year, according to Market News International calculations. [08:19 ET]

* Brazil's Monetary Policy Committee (Copom) said it may have to slow the pace of tightening in response to slowing economic growth and inflation, and also lowered its inflation forecasts, according to the minutes released Thursday of the July 22 meeting. [09:06 ET]

* Non-residential construction spending remains under pressure as building activity continues to slow, and prospects for a bounce in the second half of 2010 are dim, according to U.S. builders. As the construction recession wears on, competition among surviving builders has wounded pricing for both private- and public-sector projects, industry professionals said. [14:08 ET]

* It may not be an overstatement to say the most consequential, if muted, fiscal debate this year is taking place within the ranks of the House Democratic leadership. House Speaker Nancy Pelosi said that she strongly opposes increasing the Social Security retirement age, even as part of a broad effort to confront long-term fiscal challenges. At his weekly briefing on Tuesday, House Majority Leader Steny Hoyer also said that he opposes plans to privatize Social Security, but hinted he is open to possible adjustments in the program, including increasing the eligibility age. [13:24 ET]

* New York Attorney General Andrew M. Cuomo Thursday announced his office has launched a major fraud investigation into the life insurance industry for practices that appear to have denied grieving military families and others of millions in life-insurance cash. Cuomo served subpoenas on Prudential Financial, Inc. and MetLife, Inc. [13:11 ET]

* The main sponsor of a House bill that would help create a regulatory framework for a U.S. covered bond market insisted Thursday that the Comptroller of the Currency should be the regulatory agency for any covered bond industry, saying concerns raised by the Federal Deposit Insurance Corp have been addressed. Rep. Scott Garrett also told MNI he hopes the House would vote on his proposed legislation in September. [12:48 ET]

* The House Financial Services Committee advanced legislation that would create a framework for the covered bond market late Wednesday, but no move should be expected by the Senate until after Congress returns from recess. Sen. Bob Corker and Sen. Charles Schumer have been working on a legislation for the Senate side, but haven't introduced it yet. [12:48 ET]

* Standard & Poor's Ratings Services said Thursday that the sovereign credit ratings on the Republic of Italy (A+/Stable/A-1+) are supported by the decision by the lower house of parliament to approve a 25 billion (1.6% of GDP) fiscal consolidation package for the 2011-2012 period. The package focuses on a sharp reduction in spending by local and regional governments, alongside a public sector pay freeze, pay cuts for high earning public sector employees, and measures to reduce tax avoidance. [10:10 ET]

* Freddie Mac Thursday released the results of its Primary Mortgage Market Survey, with the 30-year and 15-year fixed-rate mortgages reaching record lows for this survey. The 30-year fixed-rate mortgage averaged 4.54% with an average 0.7 point for the week ending July 29, 2010, down from last week when it averaged 4.56%. The 15-year FRM this week averaged a record low of 4.00% with an average 0.7 point. [10:00 ET]

--Editor: Brai Odion-Esene; besene@marketnews.com ** Market News International Washington Bureau: 202-371-2121 **