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Trump warns of “severe” consequences for Khashoggi death, China urges market calm, and Italian assets tumble. Here are some of the things people in markets are talking about today.

“Bad stuff”

President Donald Trump warned of “severe” consequences for the disappearance of journalist Jamal Khashoggi, with his administration awaiting the conclusion of investigations. He added it “certainly looks” like the Saudi national is dead.  Treasury Secretary Steven Mnuchin said yesterday in a tweet that he will not be attending the ‘Davos in the Desert’ event as pressure continues to mount on Saudi Arabia. Oil, which had rallied after the crisis first hit, is holding below $69 a barrel this morning.

China growth

Gross domestic product increased at a slower than expected 6.5 percent in China during the three months through September, the slowest pace since the aftermath of the financial crisis in 2009. The benchmark Shanghai Composite Index dropped 1.5 percent during the trading session before the market was turned around by a verbal intervention from top officials, leading the gauge to close 2.6 percent higher. Some investors speculated that there was some government-directed buying fueling the late-session rally. 

Standoff

Several European Union leaders warned that the draft budget submitted by Italy will need to be revised, while the Commission sent a letter to Rome giving authorities until Monday to explain the “obvious significant deviation” from the bloc’s fiscal rules. Italian assets tumbled in trading this morning, with the nation’s 10-year yield spread over Germany widening to the most in more than five years. The country’s stocks were also hit, with banks among the worst performers as the FTSE MIB Index declined 1.4 percent to the lowest level since February 2017.

Markets drop

Overnight, the MSCI Asia Pacific Index slipped 0.2 percent, while Japan’s Topix closed 0.7 percent lower, extending the gauge’s three-week drop to 6.9 percent. In Europe, the Stoxx 600 Index was 0.5 percent lower at 5:45 a.m. Eastern Time as the region’s markets remain in dire need of some good news. S&P 500 futures pointed to gain at the open, the 10-year Treasury yield was at 3.173 percent and gold was higher. 

Coming up…

September existing home sales data is due at 10:00 a.m. For Fed watchers, there is Atlanta Fed President Raphael Bostic at midday and Dallas Fed President Robert Kaplan at 12:45 p.m., both speaking on the economy. The oil market will look to Schlumberger Ltd., and Honeywell International Inc. earnings before the bell to help gauge the health of U.S. drilling, while the latest Baker Hughes rig count is published at 1:00 p.m. 

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