09:55 · 7 October 2025

Debasement trade goes from strength to strength, as oil and cigarettes power the FTSE 100

Key takeaways
UK100
Indices
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Shell
Shares
SHELL.NL, Shell PLC
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US100
Indices
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AMD
Shares
AMD.US, Advanced Micro Devices Inc
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CAC 40
ETFs
CAC.FR, Amundi CAC 40 UCITS (Dist EUR)
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USDIDX
Indices
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GOLD
Commodities
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Key takeaways
  • French political risks weigh on stocks and bonds
  • $4000 still on the cards for the yellow metal
  • Debasement trade fuses the fate of gold and bitcoin
  • Shell trading update fuels earnings hopes
  • Tobacco firms continue to sweeten shareholders
  • US stock market dominance
  • AMD share price continues its march higher, as it becomes real competitor to Nvidia

Enthusiasm for stocks is starting to wane after another record-breaking start to the week for Wall Street. European indices are flat today and US futures are pointing to a mild decline. The gold price has pulled back from its record high around $4,000 per ounce, and the dollar is clawing back recent losses and is the top performing currency in the G10 FX space.

Earnings reports and lingering concerns about the French political crisis are the key drivers of financial markets today. Upward pressure on French bond yields is easing after President Macron gave the Prime Minister, who resigned on Monday, two days to form a new government. However, the spread between French and German 10-year bond yields remains elevated and is at the highest level since December 2024, which suggests that financial markets do not see political stability in France any time soon.

This elevated spread is a sign that a political risk premium will continue to weigh on French assets, and French yields and the Cac 40 continue to underperform versus their peers on Tuesday.

Debasement trade fuses the fate of gold and bitcoin

As global political risks rise, this is continuing to drive demand, and we think that the early morning pullback in the gold price is likely to be used as a buying opportunity as investors continue to pile into gold. The rally in gold 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.

At the same time as gold is closing in on the $4000 per ounce level, bitcoin rose to a fresh record on Monday. The debasement trade is fusing together the world’s biggest safe haven with one of the riskiest assets out there, bitcoin. We do not see this coming to an end any time soon. In the last few weeks, the correlation between bitcoin and gold has gone from a mere 6% to 36%, which means that Bitcoin and gold now move together a third of the time. Although this is not a particularly strong correlation, it would be hard to imagine gold and bitcoin moving together a third of the time a year ago. This is how much the world has changed and it could be a sign that digital assets are becoming a more trusted source of value in the current environment.

Shell trading update fuels earnings hopes

Earnings reports are also driving European stocks this morning. The FTSE 100 is outperforming other European indices on Monday after a strong trading update from Shell and good news from Imperial Brands, the tobacco company. Shell’s share price is higher by more than 1.5% and it is the 5th best performer on the FTSE 100 so far on Tuesday.

Shell reported that gas production would be significantly higher in the third quarter compared to the second quarter, and that it had higher LNG volumes. This fuels optimism that its earnings report could beat estimates. The company will report Q3 results on 30th October, and analysts expect revenues of $69.63bn, up from $65.4bn in Q2. Trading updates tend to be a good indication of what to expect at earnings season, so some of the expected good news is already being priced into Shell’s share price.

Tobacco firms continue to sweeten shareholders

Buybacks are also fueling interest in the FTSE 100 this morning. Imperial Brands’ share price is higher by more than 3% after it announced a £1.45bn share buyback. The company is planning further sweeteners for investors. Its capital returns to shareholders in this fiscal year are expected to top $2.7bn, which will be a mixture of dividends and buybacks. This is enough to send it to the top of the FTSE 100 on Tuesday.

US stock market dominance

The Nasdaq reached fresh record highs at the start of the week, as the Open AI deal with AMD sent the chip maker’s share price soaring 23%, and pushed the Philadelphia semiconductor index  to a record high. The S&P 500 is also within striking distance of a fresh record; however, it is expected to open slightly lower later today.

AMD share price continues tits march higher, as it becomes real competitor to Nvidia

The AMD share price is higher in pre-market trading this morning and is up more than 1%. The AMD/ Open AI deal means that AMD will provide the AI infrastructure for Open AI to deploy 6 gigawatts worth of AMD GPUs in the coming years. The deal elevates AMD in the chip making space and could make the company the top American rival to Nvidia. Although its market cap is a fraction  of Nvidia’s at $330bn, it is still worth more than Coca Cola, GE and Chevron. It is also the latest driver of the AI trading theme. Rapidly growing AI providers like OpenAI are now taking stakes in the AI infrastructure supply chain like AMD. This adds a new dimension to the trade and could keep the AMD stock price elevated for some time.

Ahead today, the focus will remain on global bond yields, which remain elevated due to French political risk. US economic data remains delayed due to the ongoing government shutdown, so the focus could be on Fed speakers today, including dovish Stephen Miran who is scheduled to speak twice.

Chart 1: AMD and Nvidia market cap, normalized to show how they move together. AMD is starting to play catch up with Nvidia, as its share price soars.

 

Source: XTB and Bloomberg

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