Trump arrests Madura, the potential implications
Equity markets had a solid 1st day of 2026; indeed, the FTSE 100 passed 10000 for the first time in history, reminding us that economic expectations and the performance of stock indexes are not always completely correlated. The news we all woke up to on Saturday was that Donald Trump had captured President Maduro of Venezuela, and he was putting Venezuela under temporary American control, charging Maduro with drug trafficking offences. I always thought Trump was opposed to intervention. Only time will tell us what the consequences for the US and global economy may be. Some will believe it significant, as Venezuela has the world’s largest oil reserves. Forbes certainly believes so, describing the events as ones that could reshape the US economy, with the possibility of a supply-side shock that could alter inflation, interest rates, national security, and, ultimately, U.S. equity valuations. Others take the view that Venezuela is a tiny part of global GDP, therefore unlikely to have any real economic implications. Another question countries could ask is: who could be next? Does this give China the green flag to take back Taiwan? Initially, the reaction from oil markets could be muted, as it will apparently take years to bring the antiquated infrastructure up to scratch and require tens of billions in investment. Oil prices are little changed in early trading, while US equity futures are moderately higher. It is probably fair to say that this news adds to the current feeling of geopolitical instability, but markets tend to discount the worst outcomes.
What to look forward to for the 1st full trading week of the year. For the US batch of labour market surveys, including the BLS December jobs report, the JOLTS, and the ADP Employment Report, will headline US economic data. Other key insights will be unveiled with the ISM PMIs and the Michigan consumer confidence survey. The December jobs report is expected to show nonfarm payrolls rising by about 55,000, down from 64,000 in November, while the unemployment rate is seen edging lower to 4.5% from a more than four-year high of 4.6%. Average hourly earnings are forecast to increase 0.3% month-on-month, up from 0.1% previously, and 3.6% year-on-year, suggesting wage-driven inflation pressures remain in place. Every data point will be scrutinised to move the odds on if the Fed cuts rates again at the end of the month.
China will also release a series of key macroeconomic indicators next week. Xi Jinping expressed confidence last week that China is on track to meet its growth target of around 5% this year and will roll out more proactive policies in 2026. Whatever reports they deliver, markets will treat them with a certain degree of scepticism.
There was modest positive news from the UK economy in the past week. The UK’s Purchasing Managers’ Index (PMI) for December 2025 showed expansion in manufacturing and services, with both indices above the 50.0 neutral mark, indicating recovery with rising output and new orders. The negative is that employment still fell, and costs increased; however, according to S&P Global, the figures suggest stabilisation and cautious optimism heading into 2026.