US shutdown, FOMC minutes, and big tech in focus

European markets are heading higher in early trade, with the French CAC 40 leading the push despite ongoing political uncertainty that not only sees the country without a Prime Minister, but also faces calls for President Lagarde to step down. While the swift resignation of Sebastien Lecornu understandably brought selling pressure for French stocks, today’s recovery highlights the degree to which markets are willing to overlook this political instability if it means that the previously touted spending cuts are taken off the table. Notably, the outperformance of the CAC today highlights the feeling that despite the lack of political direction in France, many of their top tier companies are global in nature and will therefore be largely undisturbed by domestic uncertainty.

Gold prices continue to boom, as the so-called “debasement trade” pushes precious metals sharply higher once again. While a year ago all the talk was whether we could see gold hit $3000, the new topic is just how long it will take to reach $5000. Ultimately the drivers for gold remain focused around a number of factors, some of which look unlikely to change anytime soon. The devaluation of the dollar and interest rate cuts may be a theme for now, but that could change next year. However, the incessant rise in debt, huge treasury supply, and a resulting lack of interest in US notes has pushed haven funds towards the likes of gold. With China leading the BRICS movement towards a new world order which removes the US as the dominant financial power, it comes as no surprise to see a number of central banks shift their focus towards gold rather than dollar denominated debt. Central banks have been net buyers of gold in 27 of the past 28 months. That has brought foreign central bank gold holdings above those of US treasuries for the first time since 1996. However, the retail crowd are undoubtedly joining in on the action, with gold-linked ETF’s enjoying a record $33 billion worth of inflows last month.

The US shutdown rumbles on once again today, with markets largely unperturbed at the uncertainty that comes as a result. Tomorrow’s jobless claims data looks unlikely to hit the newswires, with today’s FOMC minutes instead taking on a key role. However, we have seen some of the heat come out the market after the early record highs seen in the Nasdaq yesterday, with commentary from Fed’s Kashkari warning that rapid rate cuts would risk stoking inflation. Nonetheless, Trump’s man in the Fed cared little for that kind of cautious tone, with Stephen Miran instead calling for a whopping five cuts over the course of next year. That is some way away from the single 25bp cut outlined in the latest Federal Dot Plot. With the committee taking increasingly divergent views, and Trump expected set to appoint a new Chair in May, the pathway for rates over the course of 2026 remains anything but clear right now.

The tech sector undoubtedly remains in the spotlight following the blockbuster AMD deal with OpenAI, continuing the feeling that tech investors are in a gold rush where you don’t know which stock will see the next piece of news that brings a sharp spike in their share price. However, this is just another example of how the circular AI ecosystem in the US is currently taking shape. With OpenAI now at the centre of a raft of multi-billion dollar deals with the likes of Nvidia, AMD, Oracle, and Coreweave, there is no doubt that we are looking at another huge tech listing in the making.