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Fed's Quarles Boosts Calls to Strengthen Short-Term Lending Markets; Daly Says Policy in Good Place; Scene Set for RBA Easing
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Good day. Add Fed Vice Chairman Randal Quarles to the list of regulators calling for looking for possible ways to make the commercial-paper market and some money-market mutual funds more resilient. Meanwhile, San Francisco Fed leader Mary Daly said Thursday in a virtual event hosted by The Wall Street Journal that while the outlook for the economy remains uncertain, she believes central bank policy is well situated to help assist the recovery. Elsewhere, the Reserve Bank of Australia may go all in with policy easing at its meeting, James Glynn writes.
Now on to today’s news and analysis.
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Fed’s Quarles Disappointed by Short-Term Lending Strains in March
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The problems ‘were particularly disappointing, since in many ways they resembled runs that we saw in these markets’ during the 2008-09 financial crisis, Fed Vice Chairman Randal Quarles said.
PHOTO: ERIN SCOTT/REUTERS
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A top Federal Reserve official said strains in short-term lending markets that emerged in March were “particularly disappointing” given regulators’ efforts in the past decade to shore up those markets.
Fed Vice Chairman Randal Quarles on Thursday added his voice to a chorus of regulators calling in recent weeks for a re-examination of possible ways to make the commercial-paper market and some money-market mutual funds more resilient during times of market distress.
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Transcript: WSJ Interview With San Francisco Fed President Mary Daly
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San Francisco Federal Reserve President Mary Daly discussed the central bank’s tool kit and the need for a combined monetary and fiscal push to support the U.S. economy through the Covid-19 shock. Read the transcript here.
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U.S. Jobless Claims Rose to 898,000 Last Week
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After steadily declining from a peak of near 7 million in March, claims have clocked in between 800,000 and 900,000 for more than a month as companies readjust their head counts and hold back the economic recovery.
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White House Agrees to Democrats’ Coronavirus-Testing Strategy
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White House and Democratic negotiators agreed on including a national coronavirus-testing strategy in broader economic-relief legislation, as President Trump again signaled his desire for an aid package approaching $2 trillion despite opposition from Senate Republicans.
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Hiring Is Booming at These Companies
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A two-track recovery is emerging from the country’s pandemic-driven recession as some companies and careers show signs of prospering despite the recession while others in sectors like hospitality fall victim to continued lockdowns and changing consumer behavior.
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Glynn’s Take: RBA Set for Multi-Pronged Policy Easing in November
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The Reserve Bank of Australia may go all in at its policy meeting early next month and likely cut its official cash rate to near zero, lower its target for 3-year government bond yields, and announce a substantial quantitative easing program for the first time in its history. Read More.
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Key Developments Around the World
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Bank of Canada Pulling Back on Some Financial Market Purchases
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The Bank of Canada said it would pull back on some measures meant to support financial markets during the coronavirus pandemic because of improvements in market conditions. The central bank said it would discontinue its bankers' acceptance facility and mortgage bond purchase programs after the week of Oct. 26. It will also reduce the frequency of its term repo operations from weekly to bi-weekly, and limit eligible securities. The BOC began regular purchases of mortgage bonds and bankers' acceptances earlier this year to provide liquidity to financial markets that were buffeted by the effects of the pandemic. (Dow Jones Newswires)
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Argentina, Running Low on Dollars, Faces Fresh Economic Turmoil
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Behind the dollar shortage is a growing crisis of confidence threatening to wipe out Argentina’s dwindling foreign reserves and testing the ability of a nationalist government to avoid another full-blown economic and financial crisis in Latin America’s third biggest economy.
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Financial Regulation Roundup
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CFTC Votes to Pass Final Rule on Position Limits
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The nation’s top derivatives regulator voted to establish limits on the size of speculators’ bets in markets for commodities including gold, cattle and crude oil, completing a long-delayed effort to enact a provision of the 2010 Dodd-Frank Act.
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Morgan Stanley Powers Through Recession With Higher Profit
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Morgan Stanley on Thursday said its quarterly profit rose 25% from a year ago, another big U.S. bank to skate unscathed through the rockiest economy in years and weather the pandemic better than many of the clients they serve.
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Vista Equity’s Robert Smith in Settlement With DOJ in Tax Probe
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Robert Smith, the billionaire chief executive of Vista Equity Partners, has reached a $140 million settlement with the Justice Department, ending a yearslong criminal tax probe, according to people familiar with the matter.
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Individual-Investing Boom Fuels Trading in Low-Price Stocks
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Trading in speculative stocks with low share prices has surged this year, fueled by a huge influx of individuals using zero-commission investing apps and online brokerages. During several months this spring and summer, more than 25% of the shares traded in the U.S. stock market were in companies with a share price below $5, according to data from the New York Stock Exchange.
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8:30 a.m.: U.S. Commerce Department releases September retail sales
9:15 a.m.: Federal Reserve releases September U.S. industrial production
9:35 a.m.: St. Louis Fed’s Bullard speaks on monetary policy in transition at virtual International Monetary Fund panel series
9:45 a.m.: New York Fed’s Williams discusses culture and community development in virtual event
10 a.m.: University of Michigan releases preliminary October U.S. consumer sentiment
12:55 p.m.: European Central Bank’s Enria speaks at online event
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9:05 a.m.: European Central Bank’s Lagarde speaks on panel at online G-30 banking seminar during IMF/World Bank meetings
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U.S. Social Safety Net Meager and in Need of Reform
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As Federal Reserve officials make the case for more government support amid uncertainty that elected officials will deliver it, new research flags a difficult fact, that the U.S. social safety net is pretty weak. “The U.S. safety net is a patchwork of different programs providing in-kind as well as cash benefits and had many holes prior to the pandemic,” write Robert Moffitt of Johns Hopkins University and James P. Ziliak of the University of Kentucky in a report made public by the National Bureau of Economic Research. “The safety net response to employment losses in the Covid-19 pandemic largely consists only of increased support from unemployment insurance and food assistance programs, which did not
replace the lost income for many households,” the authors write. Among reforms they propose is broadening who can get unemployment insurance payments as well as new efforts to make sure that those who have lost jobs are able to get affordable medical care.
—Michael S. Derby
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China’s Households Are Shouldering the Burden of Its Recovery
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China’s recovery from the pandemic will make it one of the few economies to grow in 2020, according to the International Monetary Fund, but still-burgeoning debt may continue to drag on consumer spending, Mike Bird writes at Heard on the Street.
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U.S. manufacturing activity in the Philadelphia area surged in October after three months slowing down, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, which noted that a diffusion index for current general activity rose to 32.3 from 15.0 in September. (Dow Jones Newswires)
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Eurozone investors took 51% of Austria's new EUR2.5 billion 20-year, 0% October 2040 government bond issued Thursday, the Austrian Treasury said. Italian and German investors were keen to buy and were allocated 24% and 13% of the issue, respectively. (DJN)
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The Spanish economy will likely reach its pre-pandemic level at the end of 2022, the country's Minister of Economy Nadia Calvino says during a call with the press. (DJN)
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Chile's long-term foreign-currency IDR was downgraded to 'A-' from 'A' and its outlook was revised to stable from negative by Fitch Ratings, which cited a weakening in public finances following last year's protests along with the economic impact from the ongoing Covid-19 pandemic. (DJN)
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This newsletter is compiled by James Christie in San Francisco and Ed Ballard in London.
Send us your tips, suggestions and feedback. Write to:
Jon Hilsenrath, Michael Derby, Nell Henderson, Nick Timiraos, Jason Douglas, Paul Hannon, Harriet Torry, Kate Davidson, David Harrison, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Michael Maloney, Paul Kiernan, James Glynn
Follow us on Twitter:
@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @wsj_douglasj, @HarrietTorry, @KateDavidson, @d_harrison, @kimmackrael, @TomFairless, @megumifujikawa, @mikemaloneyny, @pkwsj, @JamesGlynnWSJ
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