Italy's Economy Has Flatlined: 5 Things The Global Markets Are Talking About Today

President Trump said late-Monday that he is predicting a "great deal" with China, despite his administration preparing to announce by early-December tariffs on all remaining Chinese imports if talks next month prove fruitless.

In currencies, the safe-haven yen eased and the Australian dollar found support, with both moves aiding their domestic equity indexes.

In China, authorities guided the yuan to a decade-low outright, a move that could fuel expectations of a further, self-reinforcing slide.

The euro remained under pressure on Monday's news that German Chancellor Angela Merkel has planned her exit after Sunday's disappointing state elections, and sterling fell to a 10-week low as markets react hesitantly to fiscal giveaways in the U.K. budget.

In bonds, the U.S. 10-year notes backed up past 3.11 percent as risk-on trading strengthened. Elsewhere, WTI oil fell to trade atop of $67 per barrel.

With all this in mind, here are five things the global markets were talking about on Tuesday.

1. Stock Markets In The Black

In Japan, the Nikkei rallied overnight as investors bought beaten-down cyclical stocks, softening fresh worries about U.S.-China trade frictions. The Nikkei share average ended 1.5 percent higher, posting the biggest daily gain in two months. The broader Topix rallied 1.4 percent on heavy volume.

Down-under, Australian shares reversed earlier losses to end higher overnight on news that Beijing is trying to stabilize its markets, though underlying sentiment remains delicate. Broad-based gains pushed the S&P/ASX 200 index up 1.3 percent. In Sout Korea, the Kospi stock index rose this morning, snapping a 5-session losing streak. The index closed 0.93 percent higher.

In China, the benchmark Shanghai Composite and the blue-chip CSI 300 gained 1.0 percent and 1.1 percent, respectively, reversing earlier losses in a volatile session. The indices found support after China's securities regulator said it would "encourage share buybacks and mergers and acquisitions by listed firms, and would enhance market liquidity," in the latest attempt to put a floor under the country's weak equity markets.

In Hong Kong, the Hang Seng index closed at its lowest in nearly 18-months, as tepid investor sentiment outweighed promises of support for mainland markets. At the close, the Hang Seng index was down 0.9 percent.

2. Oil Prices Slip On Rising Supply, Trade Tensions

Oil prices started the day on the back foot, weaker on concerns that the Sino-U.S. trade dispute will dent economic growth and by signs of rising global supply despite upcoming sanctions against Iran kicking in on November 4.

Brent crude oil was down 15c a barrel to $77.19, while U.S. light crude (WTI) was unchanged at $67.04.

CFTC data last Friday showed hedge funds slashed their bullish bets on U.S. crude to the lowest level in more than a year, cutting their combined futures and options position in New York and London by 42,644 contracts to 216,733 in the week to October 23.

On Tuesday morning, the IEA said that high oil prices were hurting consumers and could dent fuel demand at a time of slowing global economic activity.

On the supply side, oil markets remain tense ahead of forthcoming U.S. sanctions against Iran's crude exports, which are set to start on November 4 and are expected to tighten supply — especially to Asia, which takes most of Iran's shipments.

According to Baker Hughes data last Friday, in North America there is no oil shortage. Production is set to rise further as U.S drillers added two oil rigs in the week to Oct. 26, bringing the total count to +875, the highest level since March 2015.

3. BTP Yields Off Lows As Italian Economy Flat-Lines

Italian BTP yields backed upped Tuesday morning, reversing an earlier fall after GDP data showed that the country's economy ground to a halt in Q3 (0 percent growth vs. an estimated 0.2 percent).

Italy's 10-year BTP yield was up 5 bps at 3.385 percent after having been as low as 3.32 percent at the start of the Euro session. The BTP/Bund spread tightened 6 bps to 293 bps — the tightest spread in three weeks.

4. U.S. Dollar Earns Its Stripes

The pound fallen 0.33 percent to its lowest level in 10-weeks at £1.2756. Investors reacted suspiciously to fiscal giveaways in the U.K. budget on Monday, which was conditional on a favourable Brexit deal being reached. With no Brexit deal on the table, and talks in deadlock, doubts exist as to whether the largest giveaway in eight years will ever happen.

EUR/USD was steady but continues to see soft regional data, as both France and Italy Q3 GDP data came in below expectations. The European Central Bank noted last week that recent incoming economic data had been weaker than expected, but reiterated "risks to economic growth were still broadly balanced." With Germany's Merkel poor showing in state elections, dealers note that there is still the possibility of early election for Germany at some point.

5. Euro Preliminary Flash Q3 GDP

The eurozone posted its weakest quarter since it returned to growth five years ago, held back by a decline in auto production and slowing demand for exports.

Data this morning published by Eurostat showed the seasonally adjusted GDP for Q3 rose by 0.2 percent in the eurozone and by 0.3 percent in the EU28 compared with the previous quarter.

In Q2, GDP had grown by 0.4 percent in the eurozone and by 0.5 percent in the EU28.

Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.7 percent. In the eurozone.

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