Morning Bid: Venezuela upheaval tests markets

A look at the day ahead in European and global markets from Gregor Stuart Hunter

A dramatic weekend of events that saw the capture of Venezuelan President Nicolas Maduro by U.S. forces has roiled the oil market as the first full trading week of the year commences, even though global stocks appear to have looked past geopolitical risks for now.

Brent crude futures veered between gains and losses to be down 0.4% at $60.49, as traders gauge the implications for global crude supply from the U.S. attack on Venezuela, which has the world’s largest oil reserves.

In the past few hours, U.S. President Donald Trump has said that U.S. forces might launch a second military strike on Venezuela if remaining members of the administration do not cooperate with his efforts to get the country “fixed”, and hinted at further action in Colombia and Mexico. 

OPEC+, which pumps about half the world’s oil, also kept output unchanged on Sunday after a quick meeting that avoided discussion of the political crises affecting several of the producer group’s members.

Meanwhile, Venezuela’s state-run oil company PDVSA has begun cutting crude production because it is running out of storage capacity due to an ongoing U.S. oil blockade.

Stocks took geopolitical concerns in their stride, with many of last year’s winners in Asia extending gains. The Nikkei 225 soared as much as 2.9% to near a record high reached two months ago as data showed manufacturing activity stabilised in December, ending a five-month streak of deterioration.

Seoul’s Kospi jumped 2.9% and Taiwan rallied more than 3.4% to hit fresh record highs. Shares in Samsung Electronics rose as much as 6.5% thanks to the generally buoyant market sentiment, and as its co-CEO told Reuters the company plans to double this year the number of its mobile devices with AI features powered by Google’s Gemini.

Markets in China were more muted, with the Hang Seng Index 0.1% lower, dragged down by Chinese oil companies as a gauge of Hong Kong-listed energy stocks fell 2.8%.

In early European trade, pan-region futures were up 0.7%, German DAX futures rose 0.5%, and FTSE futures advanced 0.6%.

Key developments that could influence markets on Monday: 

Euro Zone: Sentix Index for January

U.K.: BOE consumer credit and mortgage lending for November

Debt auctions:

France: 3-month, 6-month and 1-year government debt

Germany: 3-month and 9-month government debt

(Reporting by Gregor Stuart HunterEditing by Shri Navaratnam)