Key Highlights

• Venezuela’s acting president Delcy Rodríguez asks the U.S. for “cooperation.”
• Oil prices fall in the wake of the U.S. operation that ousted President Nicolás Maduro.
• China orders banks to disclose Venezuela exposure after the change of leadership that followed the U.S. intervention.

Chart of the Day

Venezuela’s crude oil exports by country, 2023

^{Source: BNY}

Venezuela’s oil export potential is back in the headlines in the wake of events over the weekend. Based on the latest report by the U.S. Energy Information Administration, Venezuela had been the largest supplier of crude oil to the U.S. before sanctions were imposed, reflecting the suitability of its heavy crude for U.S. Gulf Coast refineries. The remainder of its exports were mainly destined for India, China and Europe. Exports were overwhelmingly routed through the Puerto Jose terminal, which handled around 90% of shipments prior to 2019.

Following sanctions, Venezuela’s crude exports shifted toward oil-for-loans arrangements that function largely as debt repayments rather than cash sales, most notably to China, which has extended close to $50bn in loans over the past decade and accounted for 69% of Venezuelan crude exports by 2023, alongside sanction-evasion trade flows prior to that year. Production constraints and domestic fuel shortages also led the PDVSA – the country’s state-owned oil and gas company – to suspend exports to most Petrocaribe countries from 2018, leaving Cuba as the sole exception. Cuba has also increasingly diversified supplies toward Mexico and Russia, as Venezuelan volumes declined.

Crude exports rose modestly in 2023, supported by limited easing of U.S. sanctions and extensive cooperation with Iran, which increased diluent availability, enabled higher export-ready heavy crude volumes and supported upstream output. Iran-Venezuela crude and condensate swaps have also accelerated, allowing Venezuela to dilute Orinoco crude for export, run Iranian crude in domestic refineries and free up lighter domestic grades for international sale.

What's Changed?

The geopolitical risks in 2026 rose to top billing this weekend. Oil has become the key focus after the surprise actions by the U.S. in Venezuela. Crude oil prices are lower, as most expected, falling 1%: Venezuela produces just 1% of oil output but sits on 17% of the world’s reserves. U.S. infrastructure and technology to redevelop the heavy sour crude supply will take billions of investment and many years.

• Stocks are bid, and volatility is low. The risk mood has risen, as the action is seen as a one-off and stock markets globally have been encouraged by expectations of lower energy costs. The need for cheap electricity to feed AI data centers remains a key worry for 2026. Technology shares have led the way, but Japan reopening 3% higher and the South Korean Kospi gaining 3% to set a new record high show the momentum trade for APAC. European shares are also bid, as EU defense stocks are being rethought and with natural gas prices down.
• Bonds are not in focus, yet. The commodity/technology links have so far skipped over the supply worries about IG; however, these will likely return, with $65bn in new issues expected during the week. Amos Energy is seeking $2bn for oil projects in Venezuela, by way of an example. The U.S. 10y range trade from 4.10-4.20% is holding for now. The Kingdom of Saudi Arabia is expected to announce its borrowing plans for the week, to include 3y-30y maturities and up to $15bn in volume. Germany, Spain and France are also selling bonds this week, totaling €30bn.
• Geopolitics are driving risk rethinking, helping gold and silver. The link between Venezuela and changes in the country and Iranian protests will matter today, with the focus on government actions. Denmark’s push to stop U.S. threats to take over Greenland are another case in point. The U.K. and France bombed ISIS sites in Syria following the U.S. actions in December, highlighting the unified response to any resurgence from the group in the region and beyond.
• FX is becoming important again for markets. USD has rallied further against G10 FX, with the 98.80 dollar index seen as an important technical pivot point for retesting gains of 1-2%. Notable divergence in EM is in evidence, with MXN off 0.6% and with Colombia and Chile being watched for their risk links to Venezuela. By contrast, ZAR has continued to outperform, up 0.2%.

Bottom line: The economic data will take a back seat to the expected shared development of investments driving markets, sparked by the Venezuela actions on January 3. The flow of money seems tilted back to U.S. exceptionalism and may harbor surprises for asset allocations, which logically were set up for 2026 divergence and safety. The role of gold, silver and other commodities, which are returning toward record prices, shows a bar-belled approach to the world outlook ahead, as the AI boom rather than bust continues to drive risk.

What You Need to Know

President Trump has warned that the U.S. could quickly raise tariffs on India if New Delhi fails to curb its purchases of Russian oil, speaking to reporters aboard Air Force One. Trump said he had made clear his dissatisfaction to Prime Minister Narendra Modi, while suggesting tariffs remain a key lever in negotiations. The warning follows Washington’s decision last year to double tariffs on Indian goods to 50% over India’s heavy buying of Russian crude, although Indian exports to the U.S. nevertheless rose sharply in November. Indian officials have since resisted broader U.S. trade demands, even as data show Russian oil imports have fallen and refiners are now being asked to disclose weekly purchases as talks continue. SENSEX -0.27% to 85530.87, USDINR +0.089% to 90.2762, 10y INGB +3.5bp to 6.641%.

OPEC+ kept oil output unchanged on Sunday after a quick meeting that avoided discussion of the political crises affecting several of the producer group’s members. The eight OPEC+ members – Saudi Arabia, Russia, the UAE, Kazakhstan, Kuwait, Iraq, Algeria and Oman – raised oil output targets by around 2.9 million barrels/day in 2025, equal to almost 3% of world oil demand, to regain market share. The eight members agreed in November to pause output hikes for January, February and March due to relatively low demand in the northern hemisphere winter. Sunday’s brief online meeting affirmed that policy and did not discuss Venezuela, one OPEC+ delegate said. Brent -0.626% to 60.37, WTI -0.681% to 56.93.

China’s top financial regulator has reportedly asked its policy banks and other major lenders to report their lending exposure to Venezuela after the U.S. ousted the South American country’s Beijing-friendly leader. The National Financial Regulatory Administration also urged banks to strengthen risk monitoring of all Venezuela-related credit, seeking to assess potential dangers to China’s lenders, said sources who asked not to be identified because the talks are private. The directive underscores growing concerns among regulators about potential shocks to the banking sector as geopolitical risks intensify. Venezuela has long been an important partner for China in energy and infrastructure projects, with billions in loans extended over the past decade, primarily led by policy banks such as China Development Bank. CSI 300 +1.897% to 4717.75, USDCNY +0.105% to 6.9807, 10y CGB -0.2bp to 1.853%.

Emerging market equities climbed toward a record high, driven by strong optimism around artificial intelligence stocks and sustained inflows into Asian tech names. The MSCI Emerging Markets Index rose 1.2% on Monday, putting it on track for its highest close on record and marking its strongest start to a year since 2018. Taiwan Semiconductor Manufacturing accounted for more than half of the gains following an upgraded price target from Goldman Sachs. The rally builds on last year’s strong outperformance versus U.S. equities, supported by a weaker dollar, portfolio diversification away from U.S. assets, expectations of further Chinese stimulus and perceptions that the asset class remains under-owned. While valuations have risen above their five-year average and technical indicators point to overbought conditions, strategists see scope for further gains led by Asia’s AI supply chain, albeit with higher volatility amid geopolitical risks, uncertainty over U.S. rate cuts and upcoming economic data releases. MSCI EM 1.719% to 1429.48, MSCI EM Currency Index +0.046% to 1853.57, BBG AGG EM Local Currency Government Bond Index -0.1bp to 3.784%.

What We're Watching

The Bank of Israel is expected to keep rates unchanged at 4.25%. Governor Amir Yaron made it clear at the bank’s November meeting that further easing would be extremely limited, given that the residual effects of strong fiscal impulse over the last few years remains very strong. However, this does mean that some additional restraint on inflation arising through the FX channel would also be welcome, and it might perhaps open the way for additional easing.

U.S. December ISM manufacturing is expected to improve to 48.4 from 48.2. ISM prices paid are seen at 58.7, from 58.5 in November.

U.S. Treasury sells $86bn in 13-week bills and $77bn in 26-week bills.

What iFlow is Showing Us

Mood: iFlow Mood has stabilized in positive territory at 0.17 with light buying in equities vs. selling of core sovereign bonds.

FX: Mixed and light flows with outflows for USD, EUR, JPY and NZD vs. GBP inflows within the G10 complex. LatAm and EMEA saw mild inflows vs. a mixed picture in APAC FX flows, with inflows for TWD and SGD.

FI: Mixed and light flows. The most notable flows were demand for Peruvian government bonds and cross-border buying of U.S. Treasurys.

Equities: Mixed and light flows. Within the U.S., the health care, information technology and communications services sectors are most held, with higher equity scored holdings, while the consumer staples and energy sectors are the least held. In terms of flows, the health care, financials, information technology, utilities and consumer staples sectors were sold, against light buying in energy, materials, consumer discretionary and communication services.

Quotes of the Day

“Coming together is a beginning. Keeping together is progress. Working together is success.” – Henry Ford

“There is no enjoying the possession of anything valuable unless one has someone to share it with.” – Seneca

Economic Details

The U.K.’s November monetary and credit data showed stronger household and corporate borrowing alongside faster money growth. BoE data showed net mortgage borrowing by individuals rising to £4.5bn from £4.2bn in October, while mortgage approvals for house purchases fell by 500 to 64,500, partly offset by a 3,200 rise in remortgaging approvals to 36,600. Net consumer credit borrowing increased to £2.1bn from £1.7bn, led by higher credit card borrowing. Private non-financial corporations shifted to net borrowing of £5.8bn after making net repayments in October. Sterling money growth (M4ex) rose to £15.3bn, the highest since January, while net lending to households and firms (M4Lex) increased to £15.5bn. FTSE 100 +0.302% to 9981.2, GBPUSD -0.194% to 1.343, 10y gilt -1.1bp to 4.526%.

The Netherlands’ November retail turnover increased 3.9% y/y in calendar-adjusted terms, with sales volumes up 2.6% y/y. Non-food retail turnover rose 3.8% y/y, while volumes increased by 3.2% y/y, supported by strong gains in chemists, recreational goods and DIY-related stores, although consumer electronics and white goods saw falls. Food, beverages and tobacco turnover increased by 4.1% y/y, with supermarket turnover up 4.2% y/y and specialist food shops up 2.9% y/y, while volumes rose 1.2% y/y. Online retail turnover rose 5.9% y/y, driven by a 6.5% increase at online-only retailers and double-digit growth in food and personal care products. AEX +0.976% to 977.03, EURUSD -0.35% to 1.1678, 10y NGB -0.3bp to 3.007%.

Spain’s December registered unemployment fell 0.7% m/m, down 16,291 people, taking the total to 2.41 million. On a y/y basis, unemployment came down by 5.9%, or 152,048 people, extending the run of annual falls to 56 months. Services saw the largest monthly drop at 14,287, alongside declines in agriculture and among those without previous employment, while construction and industry recorded increases. Female unemployment fell 1.5% m/m, while male unemployment rose 0.6% m/m but was down y/y. Youth unemployment dropped 6.1% m/m to a record low. Ten regions recorded decreases. Unemployment benefit coverage in November stood at a record 81.2%. IBEX 35 +0.502% to 17525, EURUSD -0.35% to 1.1678, 10y Bono -0.8bp to 3.331%.

Swiss industrial sentiment deteriorated further at year-end, while conditions in the services sector improved markedly, according to PMI data published by UBS and Procure.ch. The manufacturing PMI fell 3.9 points m/m in December to 45.8, well short of market expectations and firmly below the 50-point threshold, extending a contractionary run that has now lasted three years despite intermittent rebounds. UBS described the situation as an ongoing period of strain, with no sustained recovery in activity. In contrast, the services PMI rose sharply by 6.9 points to 52.1, moving back into expansionary territory. The improvement was driven primarily by a stronger order situation and significantly exceeded economists’ forecasts. SMI -0.606% to 13187.12, EURCHF +0.111% to 0.92979, 10y Swiss GB -0.9bp to 0.312%.

Switzerland’s November retail sales rose 2.3% y/y in real, working-day-adjusted terms, following 2.2% in October, while seasonally adjusted real sales increased by 0.1% m/m after a 0.2% rise previously. Excluding service stations, real sales were up 2.4% y/y and flat m/m. Food, beverage and tobacco sales declined by 1.4% y/y and fell 0.6% m/m, while non-food sales excluding fuel increased by 6.2% y/y and rose 0.4% m/m. In nominal terms, total retail sales increased by 1.3% y/y and 0.1% m/m. Separately, Switzerland’s October service sector turnover increased by 3.7% y/y on a working-day-adjusted basis, according to provisional data from the Federal Statistical Office.

Hungary’s December PMI signaled a clear improvement in manufacturing momentum, with the index rising m/m to 53.7. This was firmly in expansionary territory and well above both the long-term average of 52.6 and the typical December reading. According to the Hungarian Logistics, Purchasing and Inventory Association, the rebound confirms that the slowdown seen over the summer was reversed in the final third of the year. New orders increased, production expanded despite a marginal dip in its sub-index, and employment strengthened as the jobs index moved further above 50. Supplier delivery times shortened, while purchased inventories continued to rise. On the external side, export conditions improved slightly while imports weakened. Input prices rose sharply, alongside higher procurement volumes and finished goods inventories. Budapest SI +1.574% to 112779.3, EURHUF +0.183% to 384.01, 10y HGB -3bp to 6.79%.

Türkiye’s Consumer Price Index (CPI) increased by 30.89% y/y and 0.89% m/m in December, with a 12-month moving average rise of 34.88%. The main drivers of annual inflation were food and non-alcoholic beverages (28.31%), transportation (28.44%) and housing (49.45%), which together contributed significantly to the overall change. On a m/m basis, food prices rose by 1.99%, transportation fell by 1.03% and housing increased by 1.39%. Out of 143 consumption categories, 108 saw price increases, 27 recorded decreases and 8 were unchanged. Core inflation, which excludes unprocessed food, energy, alcohol, tobacco and gold, was 31.66% y/y and 0.78% m/m. The next CPI release is scheduled for February 3, 2026. BI 100 +1.185% to 11634.68, USDTRY +0.032% to 43.0448, 10y TGB +28bp to 29.02%.

Türkiye’s Domestic Producer Price Index (D-PPI) 2025 increased by 27.67% y/y and 0.75% m/m in December, with a 12-month moving average rise of 25.36%. Among the main industrial sectors, mining and stone quarrying saw the highest annual increase at 33.92%, followed by manufacturing at 27.10%, electricity, gas, steam and air conditioning at 28.69% and water supply at a notable 57.15%. On a monthly basis, manufacturing rose by 1.05%, mining by 1.63%, water supply by 1.27%, while electricity, gas, steam and air conditioning decreased by 3.0%. Across main industrial groups, annual increases were seen in intermediate goods (24.28%), durable consumer goods (33.03%), non-durable consumer goods (30.81%), energy (27.06%) and capital goods (29.79%). The next D-PPI release is scheduled for February 3, 2026.

Japan’s manufacturing PMI for December 2025 signaled stabilization in business conditions, with the headline index rising to 50.0 from 48.7 in November, ending a five-month period of decline. New orders fell at the slowest pace in 19 months, and output was broadly stable, while employment expanded at a slightly faster rate. Input prices increased at the fastest rate since April, leading to solid rises in output charges. Sector-wise, conditions improved in consumer and investment goods but weakened for intermediate goods. Firms remained optimistic about future output, anticipating new product releases and stronger demand in 2026, though concerns persisted over sluggish global conditions, an aging population and rising costs. Inventory levels and purchasing activity both declined, but at slower rates. Nikkei +2.966% to 51832.8, USDJPY -0.115% to 157.02, 10y JGB +5.9bp to 2.125%.

China’s general services PMI for December 2025 indicated continued expansion in the service sector, with the headline index at 52.0, slightly down from 52.1 in November, marking the slowest growth in six months. Both business activity and new orders rose, but at a reduced pace, while new export business declined, particularly due to fewer tourists. Employment contracted for the fifth consecutive month as firms cited cost concerns and restructuring, leading to a slight rise in outstanding business. Input prices increased for the tenth month in a row, but output charges fell amid intense competition. Despite these challenges, business confidence improved to a nine-month high, driven by expectations of stronger market conditions and expansion plans for 2026. The composite output index also showed continued, though modest, growth. CSI 300 +1.897% to 4717.75, USDCNY +0.105% to 6.9807, 10y CGB -0.2bp to 1.853%.

Indonesia’s export value in November 2025 reached $22.52bn, down 7.1% m/m, -6.6% y/y, while imports reached $19.86bn, -9.1% m/m, +0.46% y/y, to give a trade surplus of $2.663bn. Exports of mineral fuels and of iron and steel were down -18.9% y/y and -17.1% y/y, respectively, while exports of electrical machinery and equipment, vehicles and accessories, and precious metals, were up 24.8% y/y, 11.9% y/y and 36.8%, respectively. Exports to China, Japan and India were down -7.3% y/y, -12.3% y/y and -30.4% y/y, respectively, while those bound for the U.S. rose 9.5% y/y. JCI +0.815% to 8819.442, USDIDR -0.114% to 16744, 10y IDGB +4.5bp to 6.091%.

Indonesian inflation rose in December, with the headline rate at 2.92% y/y (November: 2.72%) and core CPI at 2.38% y/y (November: 2.36%). On a m/m basis, inflation accelerated to 0.64% m/m vs. 0.17% in November. Volatile foods remained the key driver at 6.21% y/y (2.74% m/m), while administered prices rose 1.93% y/y and energy inflation was modest at 0.66% y/y. Core prices, administered prices and volatile foods contributed 1.53 percentage points, 0.38 percentage points and 1.01 percentage points, respectively, to headline inflation. By expenditure group, inflation was led by food, beverages and tobacco (+4.58% y/y) and personal care and other services (+13.33% y/y), the latter driven largely by gold jewelry prices. Transport inflation was 1.23% y/y, while information, communication and financial services recorded deflation (-0.28% y/y).

Singapore November retail sales rose 6.3% y/y following 4.4% y/y in October in 2025. Excluding motor vehicles, retail sales increased by 5.8% y/y from 3.7% previously. The estimated total retail sales value in November 2025 was $4.4bn. Of this, an estimated 16.9% was from online retail sales, higher than the 14.5% recorded in October 2025. Excluding motor vehicles, the total retail sales value was about $3.9bn, of which 19.3% was from online retail sales. The higher proportion of online retail sales was mainly attributed to increased online purchases during year-end shopping events such as Singles’ Day (November 11) and Black Friday. Online retail sales made up 60.6%, 40.7% and 12.6% of total sales in the computer and telecommunications equipment, furniture and household equipment, and supermarkets and hypermarkets industries, respectively. STI +0.645% to 4686.14, USDSGD -0.055% to 1.2867, 10y SGB +1.1bp to 2.127%.

Vietnam’s Q4 2025 GDP grew 8.46% y/y, the highest Q4 growth since 2011, with the full-year rate at 8.02% (2024: 7.04%). Key sectors: agriculture +3.78%, industry +8.95%, services +8.62%. Final consumption rose by 7.95%, gross capital formation by 8.68%, exports by 16.27% and imports by 17.12%. Exports reached $475.04bn (+17.0%) in 2025, led by the FDI sector (+26.1%), with the U.S. representing the largest market ($153.2bn). Imports totaled $455.01bn (+19.4%) and came mainly from China ($186.0bn). CPI rose 0.19% m/m and 3.48% y/y in December 2025; average inflation for the year was 3.31%. The labor market improved, with employment up 1.1% y/y. Total FDI inflows were $38.42bn (+0.5%). VN-I -0.166% to 1781.53, USDVND +0.092% to 26264,10y VGB +0.1bp to 4.044%.

Thai manufacturing PMI came in at 57.4 in December, the highest figure since 58.2 in May 2023, driven by a record expansion in new orders. This was despite another downturn in foreign demand. Firms were optimistic regarding future output and continued to raise their purchasing levels in December. Headcounts shrank, however. On the price front, average input prices increased at a quicker pace at the end of the fourth quarter, but Thai manufacturers opted to lower end-prices to support sales. SET +1.73% to 1281.46, USDTHB +0.424% to 31.372, 10y TGN -0.7bp to 1.638%.

Thailand is planning a review of its inflation basket after the central bank concluded that persistently low headline inflation no longer reflects households’ cost-of-living pressures. Minutes from the BoT’s latest policy meeting showed officials highlighting price rigidity in categories such as rents, automobiles and telecommunications, prompting discussions with relevant agencies on improving data inputs and calculation methods, though no timeline was given. The review comes as consumer prices have been negative since April due to supply-side factors, while the BoT has struggled for much of the past decade to keep inflation within its 1-3% target range, which the cabinet has maintained for this year.

Thailand’s December Business Sentiment Index was stable at 49.8, remaining below the 50-point neutral threshold, while the overall BSI in 2025 edged up slightly from 2024, driven mainly by manufacturing. Export-oriented manufacturing benefited earlier in the year from front-loaded shipments ahead of U.S. reciprocal tariffs. However, sentiment weakened in H2 as tariffs took effect and baht appreciation exerted pressure on low-margin processed goods, weighing on performance and production sub-indices. Electronics remained an outlier, with confidence above 50 throughout the year on strong AI-related demand. Non-manufacturing sentiment improved q/q in December, led by hotels, restaurants and retail, which were supported by government stimulus, though the full-year index declined. The three-month expected BSI rose to 54.4.