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Oil steady as Hurricane Michael threatens Florida panhandle

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Oil steady as Hurricane Michael threatens Florida panhandle

➤ Hurricane Michael strengthens to Category 4, approaches Florida panhandle.

➤ Treasury yields push higher after yesterday's decline.

➤ Investors price in Italy rating downgrades over budget woes.

➤ Wall Street set for weak opening.

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Treasury yields resumed their ascent after dipping from a seven-year high yesterday, while Brent crude oil steadied at about $85 per barrel as Hurricane Michael approaches the Florida panhandle.

Florida utilities and a nuclear plant operator said they were prepared as Category 4 Hurricane Michael remains on track to make landfall at the state's panhandle later in the day. Michael is forecast to be "the most destructive storm to hit the Florida panhandle in decades," according to Gov. Rick Scott.

The Bureau of Safety and Environmental Enforcement estimated yesterday that about 670,831 barrels of oil per day and about 726 million cubic feet of gas per day were offline in the Gulf of Mexico due to platform and rig evacuations ahead of Hurricane Michael. Brent crude oil ticked down 0.05% to $84.96 per barrel on the ICE Futures Exchange as of 7 a.m. ET.

Ten-year yields on U.S. Treasurys added 2 basis points to 3.228%, while those on German Bunds were broadly flat at 0.555%. Italian government bonds steadied though yields remained elevated at 3.467%, as investors expect credit rating agencies to hit Italian debt with downgrades amid the government's standoff with the European Commission over its spending plans.

"Italy's radical leaders have turned into their own worst enemies," wrote Holger Schmieding, chief economist of Berenberg Bank. "Instead of trying to reassure nervous investors, the top leaders of 5 Star and the League [coalition government partners] have inflamed passions by telling markets that they would not care even if the BTP-Bund spread were to surge to 400 [basis points]."

In currencies, sterling struggled for traction against the dollar, having risen earlier amid reports that the U.K. and the European Union have made progress in negotiating terms of Britain's departure from the bloc. Separately, data showed that the British economy grew more than expected in the three months to August, though GDP growth was flat on a monthly basis.

"There's little doubt growth has stepped up a gear over the summer, helped along by better weather," said James Smith of ING, but noted that "there's a risk that economic momentum slows again over the autumn and winter, which in turn means the Bank of England is unlikely to hike rates again before May 2019."

The Japanese yen depreciated 0.23% versus the dollar, while the euro edged 0.10% higher. The Chinese yuan was flat after U.S. Treasury Secretary Steven Mnuchin warned China against devaluing its currency amid the ongoing trade dispute between the two economies.

Wall Street looks set for a weak opening, following losses in European trading. France's CAC 40 fell 0.54%, Germany's DAX index was down 0.35% and the FTSE 100 was broadly stable. In Asia, the Shanghai SE Composite gained 0.18%, while Japan's Nikkei 225 rose 0.16% and Hong Kong's Hang Seng index added 0.08%.

Gold gained 0.03% to $1,191.90 per ounce.

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The day ahead:

8:30 a.m. ET — U.S. PPI-FD (Econoday consensus: 0.2% monthly)

10 a.m. ET — Atlanta Fed business inflation expectations

10 a.m. ET — U.S. wholesale trade (Econoday consensus: 0.8% monthly)

12:15 p.m. ET — U.S. Fed's Charles Evans speaks

6 p.m. ET — U.S. Fed's Raphael Bostic speaks

7:50 p.m. ET — Japan PPI (Econoday consensus: 0.2% monthly, 3.0% yearly)