Market Faces Record Gold And Stalled Bitcoin, Trump’s Shutdown Gambit Adds Risk
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Digital Asset Market: Visa has launched a pilot program that allows banks and financial institutions to use stablecoins such as USDC and EURC as cash equivalents for pre-funding cross-border payments. Announced at SIBOS 2025, this Visa Direct initiative aims to modernize outdated payment systems by enabling near-instant international payouts and reducing the need for capital to be parked in advance. According to Visa, this new approach provides businesses with greater flexibility and choice in how they transfer money across borders, laying the groundwork for instant global payments.
In other news, Morgan Stanley is set to introduce cryptocurrency trading for retail clients on its E*Trade platform in the first half of 2026, beginning with Bitcoin, Ethereum, and Solana. Partnering with crypto infrastructure provider Zerohash for liquidity, custody, and settlement, the bank aims to integrate traditional and digital assets within the same account. This move reflects a broader regulatory shift under the Trump administration, positioning Morgan Stanley ahead of rivals like Charles Schwab and alongside players such as Robinhood. The bank also plans to develop a comprehensive crypto wallet solution and explore the tokenization of traditional assets to modernize its operations.
Macro Economics: France is facing a severe crisis marked by political paralysis, mounting public debt, and a bloated welfare state that relies on ever-increasing borrowing to maintain social stability. President Macron’s frequent government reshuffles have failed to yield results. At the same time, the new Prime Minister, Sébastien Lecornu, inherits a situation where tax hikes and superficial spending cuts are replacing genuine reform. The European Central Bank is forced to repeatedly intervene, undermining fiscal discipline and monetary stability, as deficits widen and markets lose confidence, driving French bond yields to decade highs. With real interest rates turning positive and the Eurozone model of continuous debt and intervention reaching its limits, France appears poised to trigger a broader systemic crisis across Europe that neither the EU nor its external allies, such as the United States, are likely to defuse.
Equities: The S&P 500 and other major U.S. stock indexes declined today as the threat of a U.S. government shutdown loomed, sparking concerns among investors who are already wary of a potential slowdown in the labor market, the risk of stagflation, and high stock valuations. While shutdowns do not typically cause significant market moves, the current environment could make this event more impactful, particularly since a prolonged closure might affect key economic data releases such as September’s nonfarm payrolls report. Political leaders in Congress appeared at an impasse. The prospect of a shutdown has added to market uncertainty, which portfolio strategists warn could increase volatility, especially if government operations are suspended for more than two weeks. However, lasting economic damage remains unlikely unless the disruption is prolonged. Despite these worries, the stock market has posted unusually strong gains in September, with the S&P 500 up 2 percent for the month, the Dow rising 1 percent, and the Nasdaq outperforming with a 5 percent increase. As the third quarter concludes, the S&P 500 is up 7 percent quarter-to-date, the Nasdaq has advanced 10 percent, and the Dow is up 4 percent, marking its fifth consecutive positive quarter.
The Fed and US Treasury: The latest Fed meeting showed policymakers divided on the path forward for interest rates. Boston Fed President Susan Collins has suggested today that modest further rate cuts this year may be appropriate due to waning inflation risks and concerns about rising unemployment, indicating a more dovish stance going forward. In contrast, Fed Vice Chair Philip Jefferson echoed concerns about a softening labor market and flagged downside employment risks, while remaining cautious about signaling additional cuts. Although inflation remains elevated, both Collins and Jefferson expect it to decline toward the Fed’s two percent target. However, Cleveland Fed president Beth Hammack remains concerned that inflation is moving in the wrong direction, especially in core services. Recent data reveal slowing job growth and an uptick in unemployment, intensifying the debate within the Fed about balancing the risks to both inflation and employment.
Geopolitical: President Donald Trump and Israeli Prime Minister Benjamin Netanyahu unveiled a 20-point US-backed plan to end the Gaza conflict, which offers Gaza redevelopment and the establishment of a “Board of Peace” overseen by Trump himself, with Tony Blair among its members, and calls for full disarmament and removal of Hamas from any role in governance. If Hamas rejects the plan, Israel is effectively given a green light to “finish the job” and take over Gaza to eradicate Hamas. The plan boasts support from key Arab states and includes various provisions for prisoner and hostage exchanges, international aid, and a temporary international stabilization force, yet it notably lacks any visible Palestinian representation or input in its formulation. This omission raises questions about its legitimacy and feasibility, as neither Hamas nor the broader Palestinian leadership appears to be involved in negotiations, despite the international push for Palestinian self-determination and statehood.
View from our desk
Gold’s Rally Isn’t Pulling Bitcoin Higher
Bitcoin is holding steady around $113,000 after briefly climbing to $114,842, its highest level since late September. Gold’s surge to record highs has prompted speculation that Bitcoin might follow as an alternative store of value, yet the relationship between the two assets has weakened in recent sessions. For traders, the key level on the upside remains $115,000, which would confirm a continuation of the recent rally. On the downside, the CME futures gap points to $110,000 as a level of vulnerability if momentum fades. Technical indicators still suggest potential for further gains, but the real driver will be regulatory clarity and an expansion of treasury holdings by both governments and corporates.
Government Shutdown Takes on New Risks
U.S. government shutdowns have typically been treated as temporary disruptions with minimal impact on the broader economy. The 2025 version, however, looks more complicated. President Donald Trump has threatened to make certain furloughs permanent, which could damage an already fragile labor market. Unlike prior shutdowns, where federal employees returned once funding was restored, this time the risk of structural job losses is higher. Such a development would weigh on consumer confidence, slow regional economies that rely heavily on government employment, and potentially influence corporate hiring plans. Markets may need to adjust to the possibility that this shutdown has a more profound and lasting impact than the short-lived disruptions of the past.
Data Delays Could Hamper Fed Policy
The most immediate financial market consequence of the shutdown may be the delayed release of critical government data, including employment and inflation reports. These figures shape investor expectations and inform the Federal Reserve's decision-making as it considers its next steps. Without timely data, policymakers would be forced to operate with reduced visibility at a time when economic signals remain mixed. For investors, the lack of reliable updates introduces another layer of uncertainty that could amplify volatility in both bond and equity markets. What was once dismissed as a political standoff may now directly shape fiscal planning and monetary policy, increasing the stakes for financial markets.
Happy Trading!
The 1Konto Team
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