Insights 
VT 
Spain’s 12-month Letras auction yield increased to 2.006% from the previous rate of 1.986%. This change could indicate shifts in monetary conditions or investor sentiment.
The US stock market opened higher despite worries about a government shutdown. Meanwhile, the Euro trades defensively, affected by US dollar strength and French political tensions.
Gold and Cryptocurrency Markets
Gold is inching closer to the $4,000 psychological level due to safe-haven demand. In the crypto market, Bitcoin reached a record high of 126.1k, with Ethereum and Solana also seeing gains.
In Japan, Sanae Takaichi’s leadership brings potential changes in fiscal and monetary policy. Globally, market uncertainties persist, prompting various asset movements.
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Markets and Asset Strategy
With Gold approaching the $4,000 mark, we see this as a clear signal of a flight to safety driven by the US government shutdown and European political instability. We saw a similar dynamic in early 2024 when geopolitical tensions pushed gold to new highs above $2,400 per ounce. Traders should consider buying call options on gold futures to participate in further upside while limiting downside risk.
The Euro continues to look soft, and its weakness is compounded by the strong US Dollar. This trend is likely to persist, especially after the European Central Bank began its rate-cutting cycle back in June 2024, creating a policy divergence with the US. We believe buying put options on the EUR/USD is a straightforward way to position for a potential break lower.
WTI crude oil’s weakness below $61.50 suggests markets are pricing in a global slowdown, a view supported by recent International Energy Agency reports that flagged a potential supply surplus. We feel that bear put spreads on WTI futures would be an effective strategy to capitalize on further price declines. This allows for a targeted bearish position with a defined risk profile.
Finally, while US stocks are higher, the government shutdown presents a major risk that the market seems to be ignoring. We only need to look back at the 35-day shutdown in 2018-2019 to see how quickly market sentiment can shift, even though the S&P 500 ultimately gained during that period. Buying VIX call options or cheap, out-of-the-money puts on major indices could provide a valuable hedge against a sudden reversal.
