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[Bloomberg]( Trump warns of "severe" consequences for Khashoggi killing, China growth slows, and Italian assets tumble. “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. Sponsored Content by MarketAxess [MarketAxess created Open Trading™](- empowering institutional investors and broker-dealers to trade directly with one another. In the process, over 1,400 global institutions have created the Open Market. Here, they’ll find enhanced liquidity, real cost savings, better pricing and seamless integration.  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. What we've been reading This is what's caught our eye over the last 24 hours. - This theory has some U.S. politicians [thinking big](. - GOP plans to [spend millions]( to help a long-shot New York candidate. - Kelly, Bolton get in [profane shouting match]( outside Oval Office. - Swiss banking secrecy dealt [fresh setback](. - The market keep punishing [stock bulls](. - The Balkans are [coming apart at the seams]( again. - First proof of [quantum computer advantage](. And finally, here’s what Luke's interested in this morning The Fed is pounding the table that it has every intention of taking the terminal rate for this cycle above 3 percent. But investors aren't taking the central bank at its word – perhaps because they haven’t been this [bearish on global growth since 2008](. There are only [three dots below 3 percent]( for year-end 2019, yet the market odds that the rate will break that threshold are below 30 percent. So what about that balance of risks? The minutes showed that no Fed officials think inflation is in danger of downside surprises, while three see risks tilted to the upside. The range of estimates on core and headline inflation from the September meeting also indicates that all members think it will run at an annual rate of at least 2 percent in each of the next three years, using gauges tied to consumer spending. There’s some evidence that doesn’t corroborate the Fed’s view -- even with realized inflation above 2 percent for six straight readings. Two-year measures of inflation compensation (linked to the consumer price index) are below 1.7 percent. And investors don’t seem to be betting on an inflation pickup, judging by [monthly outflows from a TIPS ETF]( at the highest level since 2013. U.S. [rents are falling]( on an annual basis. Commodity prices, [including crude oil](, have also turned lower this week. And the University of Michigan’s survey of longer-run price expectations tied a record low of 2.3 percent. Low realized inflation is one reason why President Donald Trump’s [criticism of the Fed has some economic backing]( – even if it sets aside the idea that monetary policy works with long and variable lags. Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. 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