MNI EUROPEAN OPEN: Uncertainty Leaves Oil Prices Steady

EXECUTIVE SUMMARY

• VENEZUELA’S RODRIGUEZ ASKS US TO COOPERATE AFTER MADURO RAID - BBG
• TRUMP SAYS SECOND VENEZUELA STRIKE POSSIBLE IF GOVERNMENT DOES NOT COOPERATE – RTRS
• DENMARK TELLS TRUMP TO STOP THREATENING GREENLAND - BBG
• FED'S PAULSON SEES MODEST RATE CUTS LATER IN YEAR - MNI BRIEF
• UK LABOUR MARKET COULD WEAKEN IN 2026 - THINK TANK - MNI BRIEF

Fig 1: Oil Prices Steady Despite US Military Action In Venezuela Over the Weekend  

Source: MNI - Market News/Bloomberg/Refinitiv. 

UK

LABOUR MARKET (MNI BRIEF): The UK labour market risks weakening this year due to high interest rates and above-inflation increases to the minimum wage, the Resolution Foundation think tank said in a press release on Monday. 

TRADE (BBC): “Sir Keir Starmer has said the UK should move towards closer alignment with EU markets "if it's in our national interest". The prime minister told the BBC's Laura Kuenssberg it would be "better looking to the single market rather than the customs union for our further alignment", in order to protect trade deals with India and the US.”

POLITICS (POLITICO): “In an interview with the BBC’s Laura Kuenssberg, Starmer dismissed speculation over his position after a difficult 2025 and said the upcoming British elections are not a “referendum” on his government. “I was elected in 2024 with a five-year mandate to change the country, and that’s what I intend to do, to be faithful to that mandate,” Starmer said. “I will be sitting in this seat by 2027.”

EU

DENMARK/US (BBG): “Denmark’s prime minister urged Donald Trump to stop threatening to take control of Greenland as the US president’s move to run Venezuela set alarm bells ringing in the Nordic nation about America’s military ambitions.” 

EU (POLITICO): ““We call for restraint,” EU foreign policy chief Kaja Kallas said after U.S. operation to fly Maduro out of Venezuela.”

RUSSIA (BBG): “President Donald Trump expressed fresh frustration with Russian President Vladimir Putin, bristling at the Kremlin’s ongoing military operations even as the US leader seeks to bring an end to the war in Ukraine.” 

UKRAINE (DW): “Following a meeting with European security advisors in Kyiv, Ukrainian President Zelenskyy has given an update. He said there had been 18 participants and that across three panels they had discussed the primary focus of "security guarantees, rebuilding, and a basic framework for a real peace." Zelenskyy said that another meeting with European leaders would take place in Paris on January 6, with discussions expected with US counterparts following that.”

TURKEY (ECONOMIST): “For most economies, an inflation rate above 30% is cause for alarm. For Turkey, it is a reason to celebrate. In May 2024 annualised inflation topped 75%. A series of dramatic interest-rate increases has brought it down to 31%, as of November. The central bank expects more good news on Monday, with the release of consumer-price data for December.”

US

US/VENEZUELA (RTRS): “U.S. President Donald Trump said on Sunday that the United States might launch a second military strike on Venezuela following the capture of President Nicolas Maduro if remaining members of the administration do not cooperate with his efforts to get the country "fixed."” 

POLITICS (BBG): ““A free, democratic, and stable Venezuela, led by Venezuelans, is in America’s national security interests,” Senator Mitch McConnell, the former Republican leader who has a testy relationship with Trump, said Saturday. “ 

FED (MNI BRIEF): The Federal Reserve could ease monetary policy modestly later in the year if inflation moderates and the labor market stabilizes as expected, Philadelphia Fed President Anna Paulson said Saturday. 

INFLATION (MNI BRIEF): The inflation experience of the last five years has not left a lasting impact on long-run inflation expectations, consistent with central bank credibility, according to a paper co-authored by Federal Reserve Bank of Philadelphia President Anna Paulson and presented at a conference Saturday in Philadelphia. 

OTHER

VENEZUELA (BBG): “Delcy Rodríguez, the acting president of Venezuela, invited the US to work with her country on a “cooperation agenda,” following the capture of President Nicolas Maduro.” 

COLOMBIA (BBG): “President Donald Trump warned other drug-producing nations in the Western Hemisphere that he wouldn’t long tolerate the flow of illegal substances to the US.” 

PHILIPPINES (BBG): "Philippine President Ferdinand Marcos Jr. on Monday signed into law the 2026 budget worth 6.793 trillion pesos ($115 billion) as his administration aims to revive an economy stunted by a government corruption scandal." 

CHINA

GEOPOLITICS (BBG): “President Donald Trump’s capture of Venezuelan leader Nicolas Maduro sparked widespread discussion on Chinese social media, with many users saying the operation offered a template for how Beijing could handle tensions with Taiwan.” 

GROWTH (SECURITIES DAILY): “The Chinese economy is projected to grow by around 5% in 2026, driven by a strategic shift toward emerging industries and innovative business models, Securities Daily reported, citing Wu Chaoming, chief economist at Chasing Financial, as saying.” 

REAL ESTATE (QIUSHI): “Authorities should maintain strong policy support to stabilise the real estate market, ensuring measures meet market expectations and avoid a piecemeal approach, while coordinating with other macro policies and preparing for potential developer bankruptcies and restructurings, according to a commentary published by the party-run magazine Qiushi.” 

MNI: PBOC Net Drains CNY468.8 Bln via OMO Monday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY13.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY468.8 billion after offsetting maturities of CNY482.3 billion today, according to Wind Information.

• The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4091% at 09:27 am local time from the close of 1.4286% before New Year holiday.
• The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 46 on Sunday, compared with the close of 52 on last trading day before New Year holiday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Lower At 7.0230 Mon; +4.43% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0230 on Monday, compared with 7.0288 set before New Year holiday. The fixing was estimated at 6.9888 by Bloomberg survey today.

MNI: China CFETS Yuan Index Up 0.35% In Week of Dec 31

The CFETS Weekly RMB Index was 97.99 on Dec 31, up 0.35% from 97.64 on Dec 26.

MARKET DATA

JAPAN DEC F S&P GLOBAL PMI MFG 50.0; PRE. 49.7; NOV. 48.7

CHINA DEC RATINGDOG PMI COMPOSITE 51.3; NOV. 51.2
CHINA DEC RATINGDOG PMI SERVICES 52.0; EST. 52.0; NOV. 52.1

MARKETS

US TSYS: Cash Grinds Lower; TYH5 Wedged Between Key Tech Levels

US treasury futures have done nothing today with the 10-Yr up only marginally.  At 112-07+ it remains wedged between the 100-day EMA as topside resistance and the downside resistance via the 200-day EMA of 112.

Cash is doing better with yields down -0.2bps to -0.9bps across the curve with the long end underperforming.  

• The US 2-Yr is at 3.475% - flat today.
• The US 5-Yr is at 3.736%, down -0.9bps today.
• The US 10-yr is at 4.185%, down -0.6bps today.
• The US 30-Yr is at 4.869%, down -0.2bps.  

Equity markets were key today but have seemingly brushed off the geopolitical risks, with strong rallies.  

Whilst January is typically a busy month for issuance, Monday kicks off with just a US$86bn 13-week bill auction and a US$77bn 26-week bill auction.

Data wise ISM releases are the focus with the ISM Manufacturing forecast to remain in contraction and ISM Prices paid to remain elevated

JGBS: Heavy Session, Led By 10Y, As Trading Resumes After NY Break

After the extended NY break, JGB futures are weaker and at a fresh cycle low, -44 compared to settlement levels

• Cash US tsys are ~1bp richer in today's Asia-Pac session after Friday's modest bear-steepener. Focus in the first two full weeks of the year will be on nonfarm payrolls (Friday) and CPI reports (Jan 13) for December, with those two key reports back on their original schedules having been prioritised by the BLS.
• Cash JGBs are 1-7bps cheaper across benchmarks, led by the futures-linked 7-year. The benchmark 10-year yield is 5.5bps higher at 2.121%, just shy of today's fresh cycle high.
• (Bloomberg) "Bank of Japan Governor Kazuo Ueda used his first public appearance in the new year to underscore his intention to keep raising the benchmark rate in a speech to private bankers. “We will keep raising rates in line with improvement in the economy and inflation,” Ueda said Monday in remarks at a New Year’s conference hosted by the Japanese Bankers Association. “The appropriate adjustment of monetary easing will lead to the achievement of stable inflation target and longer-term economic growth.”"
• Swap rates are 3-6bps higher, with a steepener curve.
• Tomorrow, the local calendar will see Monetary Base data along side 10-year supply. 

Source: Bloomberg Finance LP

AUSSIE BONDS: Modestly Richer On A Relatively Subdued Data-Light Session

ACGBs (YM +4.0 & XM +2.5) are modestly stronger after a relatively subdued data-light session. 

• The focus of this week will be Wednesday’s November CPI, which is the new complete monthly series. The new trimmed mean CPI appears less volatile than the incomplete series but printed 0.7pp higher at 2.8% y/y in June 2025, which was the recent trough. Q2 was at 2.7% y/y overall.
• Bloomberg consensus is forecasting trimmed mean to be stable at 3.3% in November, which would be at or above the top of the RBA’s 2-3% band for the fifth consecutive month. Headline is expected to moderate 0.2pp to 3.6% but this series continues to be distorted by previous government electricity rebates.
• Cash US tsys are slightly richer in today's Asia-Pac session after Friday's modest bear-steepener.
• Cash ACGBs are 2-4bps richer, with a steeper curve and the AU-US 10-year yield differential at +64bps.
• The bills strip is stronger, with pricing +2 to +4 across contracts.
• RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 35% for February to 98% by June and 171% by December 2026.
• Tomorrow, the local calendar will see S&P Global PMIs: Composite & Services.

Bloomberg Finance LP

BONDS: NZGBS: Bear-Steepener On First Trading day Of Year

NZGBs closed showing a bear-steepener, with benchmark yields flat to 4bps higher, as trading resumed after the extended New Year’s break. 

• The NZ-US 10-year yield differential closed at +35bps. For context, the differential was dealing around flat in mid-November.
• Cash US tsys are slightly richer in today's Asia-Pac session after Friday's modest bear-steepener. Focus in the first two full weeks of the year will be on nonfarm payrolls (Friday) and CPI reports (Jan 13) for December, with those two key reports back on their original schedules having been prioritized by the BLS. Private sector reports meanwhile are highlighted by ISM manufacturing and services reports Jan 5 and 7. No scheduled Fed speakers today.
• The local data calendar is very light this week, with just Dec Cotality home value figures out later this evening. Next week we get Nov filled jobs, along with food prices as well.
• RBNZ-dated OIS pricing closed slightly softer across meetings. No tightening is priced for February, while October 2026 assigns 20bps.

Bloomberg Finance LP / MNI

FOREX: Dollar Index Extends Recovery, Position Adjustments In Play?

The USD BBDXY index has extended its recovery, last around 1208, +0.30% versus end Friday levels. Mid to late Dec highs in the index were around 1210.4, but more important resistance is likely around the 1219 and higher region. 1219 marks the 200-day EMA resistance point, while the index couldn't sustain +1220 levels in Nov last year. Dollar gains started out against the higher beta plays in the first part of trade, as markets were risk averse after US weekend military action in Venezuela. However, modest gains for the likes of JPY and CHF proved short lived. The G10 is now down around 0.30% across the board with little differentiation for AUD, NZD versus the safe havens. 

• Cross asset catalysts for today's USD bounce aren't obvious. Risk sentiment in the equity space is mostly positive with tech related plays in Asia outperforming. Precious metals, notably silver, continue to rally as well.
• US Tsy yields are little changed so far today, but the 10yr yield is holding close to 4.18%, just off Dec highs.
• One possibility is the paring of USD shorts built up late last year, with EUR and AUD leveraged longs notable in the CFTC update to Dec 23 (+40k for AUD, +.29k for EUR)
• Looking ahead US December manufacturing ISM is released.

FOREX: Early Risk Off Gives Way To Broader USD Gains, MXN Underperforms

USD gains have been fairly uniform against the G10 as Monday's Asia Pac session unfolded. Initial risk off drove AUD and NZD underperformance but this wasn't sustained. USD/JPY got to lows of 156.66, but now sits close to session highs, last 157.25/30, up around 0.30%. This keeps the recent uptrend intact, with upside focus likely to rest near the 158.00 (where we got to late last year post the Dec BoJ rate hike and where FX intervention rhetoric picked up from Japan officials). 

• Despite the firmer US equity futures, and regional equity tone (albeit mainly focused in the tech/AI space), along with higher metal prices, the A$ has struggled to recovery ground. The pair was last around 0.6670/75. This is back close to the 20-day EMA support point, near 0.6660, which also coincides with recent lows. The 50-day EMA is further south near 0.6610.
• NZD/USD is off by a similar amount, last near 0.5750. This is close to recent lows in the pair around 0.5740, with a clean break lower potentially bringing 0.5700 back into focus.
• EUR/USD is softer as well, last 1.1680/85, levels last seen in the first half of Dec 2025. We are right around the 50-day EMA currently. GBP/USD is down 0.20% to 1.1325/30 right on the 20-day EMA support point.
• USD/MXN has risen close to 0.70%, up to 18.02/03. This keeps us close to highs from the second half of the Dec. Broader USD trends have aided the move, while remarks from US President Trump around needing to do something to curb drug flows from Mexico has likely weighed on sentiment as well. The weekend military action in Venezuela may leave the market not ruling out the possibility of US military action in Mexico to curb drug related activity. 

ASIA STOCKS: KOSPI Reaches Overbought as AI/Tech Rallies Again

The AI / tech rally continued today with key stocks like Samsung in Korea up +5.6%, TSMC in Taiwan +6.3% and Softbank in Tokyo +4% to help their respective bourses post strong gains.  However the theme of China's key AI / tech stocks underperforming regional peers continues with Tencent in Hong Kong up just +0.15% today.  Whilst the US ousting of Venezuela's president initially caused oil price volatility, Asian markets largely brushed off these tensions, maintaining their positivity throughout the day.

• The NIKKEI is gaining 3% today to 51,849 to be within 1% of the October high whilst the KOSPI jumped 3.10% to 4,442 and trend above the overbought line on the 14-day relative strength index.  Joining in the AI / tech led party was the TAIEX which jumped +2.7% to a new high of 30,153 as it too reached overbought.  There are growing calls from market observers as to the heated valuations from AI / tech stocks.  SK Hynix in Korea for example is now up over 300% since its lows of April 2025.

• China's bourses were more subdued with the Hang Seng down -0.08% whilst the CSI 300 rose +1.5%, Shanghai +1.07% and Shenzhen +1.66%.  For the Shanghai Comp, the rise above 4,000 to 4,011 brings the November high of 4,029 into its sights.   
• SE Asia's major bourses all posted gains with the SE Thai outperforming following a much stronger than expected December PMI manufacturing.  The SE Thai is up +1.7%, whilst the Jakarta Composite is up   +0.65% and the FTSE Malay +0.34%
• India's NIFTY 50 continues to exhibit lower volatility relative to regional peers as it resets new highs.  At 26,360 it remains up almost 20% from the March lows with gains of +0.15% Monday .  The NIFTY 50 finished 2025 marginally below the 5-Year high of 23.50x, but is above the full year 2026 forecast. This suggests that from a valuation perspective, any near-term pressures on equities may not come from valuations though with the equity dividend yield at 1.26%, equity valuations relative to bonds look expensive.

OIL: Uncertainty Drives Minimal Change In Oil Prices

Oil prices fell around a percent on opening following the US’ removal of Venezuelan President Maduro, which in theory should allow for an easing of sanctions on its energy exports. Prices soon rebounded driven by significant uncertainty over Venezuela’s oil production capability, the situation in the country and stronger risk appetite in markets generally. At this stage markets don’t seem concerned that the action has set a destabilising precedent. 

• WTI fell to $56.56/bbl on today’s open but soon began trending higher reaching $57.73. It is currently around $57.10 to be 0.4% down on the day. Brent declined to $60.00 before rising to $61.24 and is currently -0.2% at $60.61.
• With a record surplus widely projected for 2026, any extra Venezuelan supplies on global markets could add to current downward pressure on oil prices. OPEC’s decision on Sunday to stick with its plan of unchanged Q1 quotas should provide a short-term floor though.
• Venezuela’s oil producing region appears to have seen minimal impact from the weekend’s events. The US blockade had already caused a pause in production, which was not a major concern, as storage facilities filled.
• The industry needs significant investment after an extended period of neglect which will be a long process and so there is unlikely to be an increase in Venezuelan oil exacerbating the 2026 market surplus.
• Morgan Stanley expects global oil supply to peak in mid-2026 and so has cut its Brent forecasts for Q1, Q2 and Q3 with the trough at $55 in Q2, according to Bloomberg.
• Later US December manufacturing ISM and UK November lending data are released. 

PRECIOUS METALS: Venezuela Drives Safe Haven Flows Into Gold & Silver

The US ousting of Venezuelan dictator Maduro on the weekend has added to geopolitical uncertainty as it is unclear if the US will intervene in other countries, especially in South America, and what the outcome of current unrest in Iran could be. This appears to have driven an increase in safe haven flows in Monday’s APAC trading boosting precious metal prices. They have stabilised though in line with a stronger US dollar (BBDXY +0.3%).

• Gold is up 1.7% to $4405.7/oz after an intraday high of $4420.99. Silver is 3.6% higher at $75.44 after reaching $76.344.
• Currently Venezuela is being run by Rodriguez, a Maduro ally, and she has said that the country is ready to cooperate with the US. President Trump warned her against being obstructive and said that the US needs full access to Venezuela’s oil. Secretary of State Rubio said that it will take time to hold elections and that the US doesn’t have troops on the ground.
• Risks at this stage don’t appear to stem from Venezuela itself but what type of precedent the US action has set.
• Equities are generally stronger with the S&P e-mini up 0.1% and CSI 300 +1.6% but Hang Seng down 0.1%. Oil prices are lower with WTI -0.4% to $57.08/bbl. Copper is 2.9% higher.
• Later US December manufacturing ISM and UK November lending data are released. 

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
04/01/2026	1730/1230		US	Minneapolis Fed's Neel Kashkari
05/01/2026	0030/0930	**	JP	S&P Global Final Japan Manufacturing PMI
05/01/2026	0145/0945	**	CN	S&P Global Final China Services PMI
05/01/2026	0145/0945	**	CN	S&P Global Final China Composite PMI
05/01/2026	0700/0200	*	TR	Turkey CPI
05/01/2026	0730/0830	**	CH	Retail Sales
05/01/2026	0930/0930	**	GB	BOE M4
05/01/2026	0930/0930	**	GB	BOE Lending to Individuals
05/01/2026	1330/0830	**	US	WASDE Weekly Import/Export
05/01/2026	1500/1000	***	US	ISM Manufacturing Index
05/01/2026	1630/1130	*	US	US Treasury Auction Result for 26 Week Bill
05/01/2026	1630/1130	*	US	US Treasury Auction Result for 13 Week Bill
06/01/2026	2200/0900	*	AU	S&P Global Final Australia Services PMI
06/01/2026	2200/0900	**	AU	S&P Global Final Australia Composite PMI
06/01/2026	0001/0001	*	GB	BRC Monthly Shop Price Index
06/01/2026	0745/0845	***	FR	HICP (p)
06/01/2026	0815/0915	**	ES	S&P Global Services PMI (f)
06/01/2026	0815/0915	**	ES	S&P Global Composite PMI (final)
06/01/2026	0815/0915		EU	ECB Cipollone Chairs Intl Monetary System Panel
06/01/2026	0845/0945	**	IT	S&P Global Services PMI (f)
06/01/2026	0845/0945	**	IT	S&P Global Composite PMI (final)
06/01/2026	0850/0950	**	FR	S&P Global Services PMI (f)
06/01/2026	0850/0950	**	FR	S&P Global Composite PMI (final)
06/01/2026	0855/0955	**	DE	S&P Global Services PMI (f)
06/01/2026	0855/0955	**	DE	S&P Global Composite PMI (final)
06/01/2026	0900/1000	***	DE	North Rhine Westphalia CPI
06/01/2026	0900/1000	**	EU	S&P Global Services PMI (f)
06/01/2026	0900/1000	**	EU	S&P Global Composite PMI (final)
06/01/2026	0930/0930	**	GB	S&P Global Services PMI (Final)
06/01/2026	0930/0930	***	GB	S&P Global/ CIPS UK Final Composite PMI
06/01/2026	1300/1400	***	DE	Germany CPI (p)
06/01/2026	1300/1400	***	DE	Germany CPI (p)
06/01/2026	1300/0800		US	Richmond Fed's Tom Barkin
06/01/2026	1355/0855	**	US	Redbook Retail Sales Index