Beyond Oil, the Venezuelan developments are highly unusual

Feelings were as mixed as the US data yesterday. The S&P 500 kicked off the session on a positive note and hit a fresh record high, as the ADP report printed a softer-than-expected number of job additions in December. According to the report, the US economy added around 41K new private jobs last month versus 50K expected by analysts. The number was weak enough to fuel Federal Reserve (Fed) rate-cut expectations but not weak enough to revive recession fears. Just sweet.

Then, the ISM data that landed later showed a strong expansion in the services sector since November 2024 — though December numbers tend to be boosted by the Christmas and year-end holiday period, so seasonality should be taken into account.

Finally, the JOLTS data warned that US job openings unexpectedly fell in November to the lowest level in more than a year, while hiring slowed.

Together, the data pointed to a slowing — but not collapsing — US economy. Traders slightly pared back March rate-cut expectations, the US 2-year yield fluctuated just below the 3.50% mark, and equities gave back gains. The S&P 500 ended the session down 0.34%, while the tech-heavy Nasdaq — now less sensitive to rate expectations — eked out a small gain, even though its growth-heavy constituents should, in theory, see valuations more impacted by rate changes, but this relationship is partly offset by strong cash flows and solid balance sheets of the heavy-weight Big Tech companies.

In energy, the S&P 500’s energy ETF posted a second consecutive loss — and with notable swings — though performance diverged across components. Exxon, for example, fell 2% (after Tuesday’s 3% retreat from an all-time high) as the US announced that Venezuela “will be turning over” up to 50 million barrels of oil to the US, while Valero Energy, an oil refiner, gained more than 3%. “We’re just going to get that crude moving again and sell it,” the White House said.

US crude prices fell on rising supply prospects linked to these additional Venezuelan barrels — even though Venezuelan oil production would take years to return to levels seen a decade ago. Venezuela still operates with outdated infrastructure and exports less than 1% of global oil supply. Still, Exxon Mobil warned that lower oil prices reduced its Q4 results by $800 million to $1.2 billion. The upcoming earnings season may prove challenging for oil majors. Could this mark a turning point in the recent oil-stock rally? One to watch.

Beyond oil, the Venezuelan developments are highly unusual. The US intervening directly, removing a country’s leadership and seizing access to natural resources would mark a major escalation. It raises uncomfortable questions about who could be next — Colombia, Greenland, Canada — all regions Trump has previously targeted either for their natural resources, strategic positioning, or both. We may yet regret last year’s trade war.

European defence stocks extended their rally, with the sector up more than 10% since the start of the year. Across the Atlantic, however, major US defence names including Lockheed Martin and RTX came under pressure after Trump said he would not allow dividends or share buybacks for defence firms, preferring they reinvest the capital. That gives an idea of what may lie ahead.

This is not the first time the White House has intervened in corporate affairs. The US government now holds stakes in key sectors (including rare-earth miners and Intel), takes a cut of Nvidia’s China-related revenues, and is signalling limits on capital returns for defence firms. It is an odd turn for a country long seen as the godfather of free capital markets. Investors may grow increasingly sceptical of rising government influence in corporate decision-making, especially where political goals diverge from shareholder value. One wonders whether this accelerates rotation out of US assets.

Ironically, RTX jumped 4% in after-hours trading after Trump mentioned its Raytheon unit in a Truth Social post. Give me a break.

Geopolitical tensions are also heating up between China and Japan at the intersection of trade and technology. Beijing has imposed export restrictions on dual-use goods to Japan — including key semiconductor inputs and rare-earth materials — and launched an anti-dumping investigation into dichlorosilane, a critical chipmaking chemical imported from Japan, following complaints from domestic producers. Tokyo said the export curbs were unacceptable and warned of disruptions to global supply chains. Funnily, the dispute comes against the backdrop of Japan’s own export controls on advanced chip technology and rising tensions over Taiwan.

Japan’s tech-heavy Topix index has retreated from all-time highs reached earlier this week. European and US futures point to a bearish open amid ongoing trade and rising geopolitical uncertainty.

Australian exports, for example, fell sharply in November — down more than 10% to the US — reflecting the impact of newly imposed tariffs and sending the AUDUSD lower this morning.

Closer to home, the Swiss franc is slightly weaker against the US dollar despite geopolitical tensions. Switzerland will publish its latest inflation data today, expected to show flat monthly and annual prices, helped by the strong franc.

Gold, meanwhile, is facing resistance near record highs, but any pullback is likely to attract fresh demand as it increasingly serves as a strategic store of value amid waning appetite for the US dollar.

Turkey, for example, will implement a Precious Metal Tracking System (KMTS) requiring all gold products — from one-gram bars to kilogram pieces — to carry an official banderol and unique serial number, making their origin and trade history fully traceable. The policy will take effect in April 2026. Under the system, cash gold transactions will be phased out in favour of bank transfers and card payments, with invoices recorded digitally. Among other reasons, this move reflects efforts to reduce dollar dependence indirectly while tightening control over domestic gold holdings — an asset gaining strategic importance in today’s increasingly fragmented geopolitical landscape.