Stocks falter, gold shines as traders weigh political turmoil

AFP | London

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Wall Street stocks turned lower yesterday and gold closed in on $4,000 per ounce as investors weighed the US government shutdown and political turmoil in France.

Wall Street rose at the open, however, with sentiment still buoyed by a multi-billion-dollar partnership deal between ChatGPT developer OpenAI and chipmaker Advanced Micro Devices (AMD).

AMD shares jumped 7% in early deals Tuesday after double-digit gains on Monday, helping the S&P 500 and tech-heavy Nasdaq Composite set fresh record highs.

“Investors continue to ‘follow the money’ when it comes to anything to do with generative artificial intelligence,” David Morrison, senior market analyst at Trade Nation, said in a note.

“This is despite fears that the whole investment thesis looks increasingly incestuous, as money gets pumped around companies within the sector,” Morrison said.

But Wall Street’s three main indices turned lower during morning trading amid a bout of profit-taking.

In Europe, the Paris stock market edged back up after a sell-off, even as President Emmanuel Macron faced a call from his first prime minister, Edouard Philippe, to resign over a deepening political and budget crisis.

London and Frankfurt also ended broadly stable,  but the euro fell further against the dollar.

Philippe, who himself aspires to become president, urged Macron to call for an early presidential election.

“He must take the decision that is worthy of his function, which is to guarantee the continuity of the institutions by leaving in an orderly manner,” Philippe told the RTL broadcaster.

The latest crisis erupted after Prime Minister Sebastien Lecornu, appointed less than a month ago, stepped down on Monday after failing to rally support for his new government.

Macron later ordered him to make a last-ditch effort to rally support for a coalition government, but there was no sign of progress.

Meanwhile gold approached within $10 of hitting $4,000 per ounce.

“Gold has benefited from multiple catalysts this year, including tariff uncertainty, stubborn inflation, and a falling US dollar,” said analyst Bret Kenwell at eToro.

“Uncertainty around the government shutdown and prospects of lower interest rates have only seemed to fan the flames of this year’s rally,” he added.

The US government shutdown stretched into a seventh day, with Republicans and Democrats appearing no closer to an agreement.

Bets on the Federal Reserve cutting interest rates this month and the political crisis in France are adding to the allure of gold, a safe-haven asset.

Kathleen Brooks, research director at trading group XTB, said the rally on the precious metal is part of the “debasement” trade.

“This trading theme is driving demand for alternative assets such as gold and crypto, as the dollar faces a long-term decline and fiscal concerns continue to rise around the world,” she added.

In Asia, Tokyo eked out another record following the weekend election of a pro-stimulus advocate to lead Japan’s ruling party, before paring gains to close flat.

The election of Sanae Takaichi -- expected to become Japan’s prime minister this month -- ramped up optimism that she will kick-start the economy through stimulus measures.

Yields on 30-year Japanese bonds hit their highest level, reflecting fears the country’s already colossal debt will balloon further.