Market Report.
🗣️ President Trump said he is willing to negotiate with Democrats over healthcare subsidies, which could help resolve the government shutdown. Senate Democratic Leader Chuck Schumer said Democrats are ready to work with Trump and Republicans on healthcare if they are serious about it.
🔄 Trump later said he would only be willing to negotiate after the government reopens, contradicting his earlier statements. The shutdown began on October 1, 2025, due to the failure of Congress to pass funding bills for the new fiscal year. About 2 million federal workers have had their pay suspended, and roughly 750,000 have been ordered not to report to work. Due to staffing shortages, Burbank Airport in California will operate without air traffic controllers for several hours on Monday, which the state’s governor blamed on the government shutdown – California is governed by Democrats.
❌ Two more measures to fund the government failed in the Senate on Monday, marking the fifth time such votes have fallen short. House Speaker Mike Johnson said there is “nothing for the House to negotiate” and that the lower chamber has “done its job.”
🇫🇷 President Macron has tasked the outgoing Prime Minister, Sebastien Lecornu, to hold last-ditch talks with other political parties to try to find a way out of the crisis. Lecornu resigned just hours after announcing his cabinet lineup, making it the shortest-lived administration in modern French history and deepening the country’s political turmoil.
🔍 Macron has several options – he could appoint a new Prime Minister, dissolve parliament and call snap elections, or even resign. Far-right and hard-left parties have demanded early elections or Macron’s resignation, while the Socialists prefer avoiding snap polls and having Macron name a left-wing PM.
📉 The political instability has triggered declines in financial markets, with the CAC 40 index in Paris and the euro both falling.
📈 The French bond market is approaching levels reminiscent of the debt crisis premiums seen in 2011-2012. Recent charts suggest that it could potentially breach these levels significantly, moving closer to the premium levels experienced in 2009.
💬 In Europe, ECB President Christine Lagarde stated that inflation remains close to the ECB’s 2% target, and that underlying price pressures are also on track, with wage growth expected to moderate further.
🛑 The ECB forecasts that sluggish export performance, driven by higher tariffs, a stronger euro, and increased global competition, will hold back growth for the remainder of 2025, but these headwinds should fade in 2026.
🔒 Most ECB policymakers, including Lagarde, have indicated reluctance to lower the current 2% deposit rate further. However, some officials like Bank of France Governor Francois Villeroy de Galhau have not ruled out another rate cut, especially amid the political turmoil in France. Lagarde reiterated the ECB’s stance of making decisions based on incoming data, without pre-committing to future policy moves.
💰 Lagarde also raised the prospect of common EU debt, such as for financing public goods like defense, as recommended in the Draghi report, though this remains a controversial topic.
📊 An analysis by Bloomberg considers that the increase in inflation through wage increases in the UK would paradoxically favor the government’s fiscal deficit, as it would increase its revenues by reducing the deficit.
📈 The Office for Budget Responsibility (OBR) is likely to substantially revise up its projections for price and wage growth, bringing them more in line with the Bank of England and private-sector forecasts. This upward revision to inflation and wage growth forecasts will feed into the OBR’s fiscal projections, reducing the expected £20-30 billion shortfall the government was facing. The revenue gains from higher prices and wages are expected to outweigh the rise in debt interest costs, resulting in a net positive impact on the public finances.
⚠️ However, higher inflation also means the Bank of England is expected to keep interest rates higher for longer, increasing the government’s debt servicing costs.
💼 Ken Griffin, the billionaire founder of Citadel, said investors are starting to view gold as a safer asset than the U.S. dollar, which he finds “really concerning.” Griffin stated that there is “substantial asset inflation away from the dollar” as people are looking for ways to “de-dollarize” or de-risk their portfolios from U.S. sovereign risk, especially considering Trump’s government shutdown and trade war. Griffin said the U.S. is seeing fiscal and monetary stimulus that’s more akin to what normally happens during a recession, which is stoking markets and putting the economy on a “sugar high.” Griffin expressed more concern about brilliant students in India or China choosing not to come to America in relation to the H-1B visas.
🤝 A deal between OpenAI and AMD, announced last night, introduces a new dimension to the increasingly interconnected nature of AI’s corporate economy, where capital, equity, and computing resources are traded among a small group of companies driving the technology forward. Nvidia is providing the capital to purchase its chips, while Oracle is assisting in building infrastructure. AMD and Broadcom are stepping in as key suppliers, with OpenAI anchoring the demand. This tightly wound circular economy raises concerns among analysts, who fear that any weakening of a single link in the chain could lead to significant strain on the entire system.
🌍 Geopolitics:
⚖️ ECB President Christine Lagarde stated that any European Union decision on using frozen Russian state assets to help Ukraine must follow international law. The ECB is “very attentive” to the process, as Lagarde is concerned that a legally contentious move could damage the credibility of the euro and discourage investors from holding euro assets, potentially harming financial stability.
💶 The EU is exploring a plan to invest the 210 billion euros worth of frozen Russian sovereign assets in zero-coupon bonds issued by the European Commission, with guarantees from EU governments. The proceeds would then be used to issue a “Reparations Loan” to Ukraine. Lagarde emphasized that any such scheme must be done in accordance with international rules and international law, and that the decision should be agreed by all the parties that hold the Russian assets.
💸 When the Russian assets were frozen at the start of the war, the money was invested in bonds. Those bonds have now matured, and the cash is currently stuck at the Euroclear central securities depository in Belgium. A legally questionable move could undermine the credibility of the euro and discourage investors from holding euro-denominated assets, which could have negative implications for financial stability.
📊 Market View.
📈 Mini S&P 500 futures remain at historical highs around 6,778 points, while Nasdaq futures are similarly positioned at approximately 25,155 points.
💵 The dollar also shows strength, maintaining the levels reached at the start of the week, with the dollar index (DXY) at 98.30 points. EUR/USD has once again fallen below 1.17.
📉 DAX 40 futures are holding close to historical highs at 24,507 points, completely unaffected by the political and economic crises affecting Europe. Eurostoxx 50 futures are in a relatively similar situation, trading at 5,640 points with slight retracements from their recent gains. Meanwhile, the risk premium on the French 10-year bond rose by more than 2% during yesterday’s session.
🛢️ Crude oil: Brent crude, which managed to recover the $65 mark at the start of the week, is currently trading above these levels at $65.60.
🏆 Gold has reached new historical records once again. Gold futures hit nearly $4,000 per ounce in recent hours but have slightly retraced to the current $3,982 per ounce.
💰 Bitcoin has also achieved new historical highs, surpassing $126,200 during yesterday’s session, after which it has retraced to the current $123,975.
