With scant economic data for investors to pour over as the new year gets started, all eyes have turned to the recent U.S.-Venezuela upheaval. On Saturday, the world woke to news that President Donald Trump had authorised a raid of Venezuela overnight, capturing the current President Maduro and his wife on alleged narco-terrorism charges. The latest developments have not come as a total surprise, however. Since September, the U.S. Navy has positioned a large number of vessels near the Venezuelan coastline and intercepted several Venezuelan oil tankers. While Trump has stated that the leadership of the country remains a U.S. decision, the UN Commission of Human Rights has denounced the move as a violation of international law.
But does this mean that other regions are suddenly vulnerable (for example, the ever‑mentioned ‘Greenland’)? Not necessarily, nor does it imply definitive or lasting negative consequences for markets, as such events generally don’t. What it may highlight, however, is that some governments – particularly in Europe – could choose to sustain higher defence spending in order to preserve influence within an evolving geopolitical landscape, especially as the U.S. takes an increasingly more assertive role on the global stage.
It may also be surprising to some that markets largely shrugged off the recent upheaval, given their general dislike for uncertainty. And yet, that’s exactly what happened, with investors showing more optimism for AI demand via big tech names. Oil prices also inched slightly higher this week, and U.S. energy reserves rallied, with the market increasingly focused on the possibility of a major future increase in Venezuelan supply following Maduro’s capture, which could accelerate the end of the U.S. oil embargo and open the door for American companies to reinvest in the country’s energy infrastructure. Venezuela currently produces only about 1% of global output after years of sanctions and underinvestment, yet it holds around 17% of the world’s crude reserves, meaning any restoration of its industry may expand global supply over time.
On Monday, Bank of Japan Governor Kazuo Ueda signalled that the central bank intends to keep lifting interest rates, provided economic conditions and inflation continue to develop broadly as expected. He highlighted that both wages and prices are likely to rise steadily in tandem, reinforcing the case for tighter policy. Despite facing external pressures last year, particularly from higher U.S. tariffs, Japan’s economy still managed a modest rebound. Financial markets have largely embraced the BOJ’s more hawkish stance, pushing Japanese government bond yields to levels not seen in decades. Meanwhile, the yen has slid further against the U.S. dollar, helping Japanese exporters but also adding to inflationary strain at home.
Still to come this week we have Eurozone CPI and unemployment rate, China’s CPI and U.S. Michigan consumer expectations.
Nicola Tune, Portfolio Specialist
