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.

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.

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. 

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)

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.

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

9:05 a.m.: European Central Bank’s Lagarde speaks on panel at online G-30 banking seminar during IMF/World Bank meetings

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

• 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)
• 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)
• 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) 
• 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)

This newsletter is compiled by James Christie in San Francisco and Ed Ballard in London. 

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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

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