Market sentiment steady despite US raid to Venezuela

In focus today

In the US, the December ISM Manufacturing index is due for release today. The PMI released earlier indicated a slowdown in growth momentum towards the end of 2025.

In the euro area, the Sentix indicator is released today and will show the first estimate of investor confidence in 2026. Confidence was higher in 2025 compared to 2024 but ended the year on a downward trend.

The rest of the week will feature several notable data releases. On Wednesday, we expect euro area HICP inflation for December to decline to 2.0% y/y from 2.1% in November. In the US, Wednesday will also bring the December ISM Services index, the ADP private sector employment report for December, and the November JOLTs report. Later in the week, the key highlight will be the US Jobs Report for December, set for release on Friday.

Economic and market news

What happened over the weekend

In geopolitics, the US conducted a controversial raid to capture Venezuelan President Nicolas Maduro on Saturday, who is now detained in New York and faces drug trafficking charges in court today. For now, the rest of Maduro's government remains in power, with Vice President Delcy Rodriguez taking over as an interim leader. Rodriguez has opposed Trump's calls to work with the US, but Trump has threatened she would 'pay a very big price if she doesn't do what's right'. Secretary of State Marco Rubio has also said Venezuela's next leader 'should be aligned with US interests', though the exact claims of the US administration remain unclear. While many Western nations support the removal of Maduro, international criticism has emerged regarding the legality of the raid.

Trump also announced plans for major US oil companies to return to Venezuela and refurbish its degraded oil infrastructure. Currently, Chevron is the only US oil major operating in the country. While the US intervention in Venezuela caught markets off guard, we doubt the near-term implications for the oil market will be significant. Oil prices have remained relatively steady in early Monday trading, while broad USD has strengthened. Venezuela's crude export is small and regardless; there are no indications of any disruptions to production or sales. The potential long-term effects could be more profound, but clouded with uncertainty. Venezuela holds a substantial untapped oil reserve, but its production is far from pre-sanctions highs. It will likely take large-scale investments and several years to reap these gains. In addition, Venezuela is a founding member of OPEC, i.e. a production rise would have to be coordinated with the policy of the group. Finally, Venezuela would need to find buyers for its heavy crude.

OPEC+ held a brief meeting on Sunday and reaffirmed their November decision to maintain oil output levels through March. According to one OPEC+ delegate, the meeting did not address the US capture of Venezuelan President Maduro. This comes amid political turmoil within the group, including tensions between Saudi Arabia and the UAE over the Yemen conflict.

In China, the RatingDog Services PMI was released overnight, and edged down to 52.0 in December from 52.1 in November, marking the weakest expansion in six months. New business growth softened, while foreign demand declined, particularly due to lower tourist numbers. Input costs rose for the tenth consecutive month, driven by higher raw material and labour costs, while firms reduced selling prices amid intensifying competition. Business sentiment improved to a nine-month high, supported by expectations of stronger market conditions and expansion plans for 2026, though structural challenges such as shrinking employment and deflationary pressures remain key constraints.

Most final manufacturing PMIs were released already on Friday. In the US, the index eased to 51.8 in December from 52.2 in November, marking the slowest expansion in five months as new orders declined and exports fell further. In the euro area, final manufacturing PMI dropped to 48.8 from 49.6, with output and new orders contracting, particularly in Germany, Italy and Spain. Despite weaker sales and higher input costs, firms signalled their strongest optimism for the year ahead since early 2022.

In Asia, manufacturing activity continues to recover with PMIs for several East Asian economies rising above the neutral level of 50 in December. Taiwan, South Korea and the Philippines saw particularly strong new orders, suggesting improving demand across the region. The recovery follows a continued rise in industrial metal prices, along with a decent rebound in China's NBS manufacturing PMI, released last week. While trade war-related disruptions impacted Asian manufacturing and exports in 2025, demand now appears to be recovering broadly.

In Sweden, manufacturing PMI rose to 55.3 in December from 54.7 in November, marking six consecutive months above the long-term average. The increase was driven by stronger production and new orders, supported by both export and domestic demand, while supplier delivery times lengthened due to solid activity rather than supply-chain stress.

Equities: Equities started the year on a positive footing, broadly confirming the regime we saw into the end of 2025. Headline indices moved higher, but cyclicals underperformed defensives, driven almost entirely by weakness in the US and in particular US consumer cyclicals. Industrials stood out as the best-performing sector on the first trading day of the year.

VIX was lower on Friday, min vol stocks underperforming, and small caps were outperforming large caps. In short, market tone remains firmly risk-on despite the consumer cyclicals struggling in the US.

What is notable, however, is the continued underperformance of the US. US large caps, and especially large-cap tech, have lagged meaningfully in the risk-on markets late 2025, and this pattern is also visible in today's futures. Risk appetite is there, but it is increasingly expressed outside US mega-cap tech.

Asian markets are strong this morning, not only in Japan but also in South Korea and Taiwan, supported by solid PMI prints late last week. AI-related themes are once again gaining traction in the region, with South Korea up around 3.5% and Taiwan up roughly 2.5% today - a move not mirrored to the same extent in US futures.

US futures are higher this morning, but European futures are even stronger, despite Europe having already outperformed the US into year-end and on the first trading day of the year.

FI and FX: The FX market was relatively steady on the first trading day of 2026. Scandies gained a little vis-à-vis both the EUR and the USD with EUR/NOK slipping below 11.80 and EUR/SEK holding close to 10.80. EUR/USD stayed above 1.17 to start the year. Oil prices were low and steady on Friday ahead of the events over the weekend in Venezuela. The 10Y US yield rose to the highest since before Christmas dragging its 10Y German counterpart up, and equity markets opened the year on a high note.