1. Venezuela Under Attack, Oil and Gold Markets on Edge
At the beginning of the new year, as global markets had not fully awakened from the holiday, they were jolted awake by explosions from the Caribbean. In the early hours of January 3, local time, the U.S. launched a military strike against Venezuela, and the situation escalated rapidly. Trump announced the capture of President Maduro and his wife, while Venezuela declared a national state of emergency and called for armed resistance.
● Event Progression and Escalation: This action did not come without warning. The Trump administration had been exerting pressure on Maduro's regime for months, including troop increases, targeting drug trafficking boats, and labeling it a terrorist organization. However, this direct military strike, especially reportedly conducted without sufficient notification to Congress, marked a sharp deterioration in the situation. Reports suggest that the U.S. military may initiate a second round of attacks, casting a huge shadow over subsequent developments. Domestic opposition in the U.S. has emerged, labeling this a "foolish military adventure," highlighting the controversy surrounding the action.
● Dual Impact on Oil Markets: As a country with the largest proven oil reserves in the world, the situation in Venezuela has a direct impact on the oil market.
○ Short-term Surge Risk: Currently, due to U.S. sanctions, Venezuela's oil production has shrunk to about 900,000 barrels per day. Any military conflict leading to damage to oil fields, port facilities, or transportation disruptions would immediately trigger supply panic, driving up international oil prices, especially for heavy crude oil.
○ Long-term Plunge Concerns: The deeper market concern lies in the potential consequences of a regime change. If a new government supported by the U.S. comes to power and lifts sanctions, Venezuela's vast oil production capacity (theoretically recoverable to 3 million barrels per day) could gradually return to the market. Against a backdrop of already oversupplied global markets, this would become a significant force suppressing oil prices in the medium to long term. The oil market will be caught in a conflicting game between "short-term geopolitical premiums" and "long-term supply shocks."
● Safe-Haven Drive for Precious Metals: The sharp rise in geopolitical risks traditionally stimulates market demand for safe-haven assets like gold and silver. Especially at the beginning of the year, when market liquidity has not fully recovered, price volatility may be amplified. However, precious metals also face another opposing force this week.
2. Non-Farm Payroll Revision Storm Approaches, Rate Cut Expectations Under Test
In contrast to the suddenness of geopolitical events, the financial markets have been on high alert this week for a series of key economic data that could determine the Federal Reserve's policy path, with the focus on the December non-farm payroll report.
● Special Characteristics and Focus of Non-Farm Data: The December non-farm report is the first since the federal government ended its record shutdown, and the normalization of statistical processes is under scrutiny. The market consensus expects an addition of 55,000 jobs, with the unemployment rate slightly dropping to 4.5%. However, the real "eye of the storm" lies in the revision of November data. Due to the impact of the government shutdown on data collection, participation rates were low, leading to doubts about the reliability of the initial values. The previous value has been significantly revised down from an increase of 64,000 to a decrease of 105,000, and it is not ruled out that this week's report will undergo another major revision. Traders generally believe that the revision of November data may be more important than the December additions themselves. If the revision shows that the job market is weaker than expected, it will strongly affect market sentiment.
● Market Logic and Potential Impact:
○ Weak Data → Early Rate Cuts: Current futures market pricing shows a low probability of a rate cut at the Fed's meeting at the end of January, but the probability of a rate cut in March is close to 50%. If the December data itself is weak, or if the November data is further revised down, it will reinforce signs of cooling in the U.S. economy (especially the job market). This provides the Fed with a reason to support the economy, potentially heating up expectations for a rate cut in March or even earlier. The viewpoint of North Star Investment Management is representative: a soft job market gives the Fed a "good excuse" to change its outlook.
○ Strong Data → Delayed Expectations: Conversely, if the data performs robustly, especially if wage growth (expected at 0.3% month-on-month, 3.6% year-on-year) remains sticky, it will confirm the cautious stance of some Fed officials, indicating that inflation risks have not been eradicated and that rate cuts should not be made too quickly. This would dampen aggressive rate cut expectations in the market, potentially boosting the dollar and putting pressure on the stock market (especially high-valuation growth stocks) and precious metals.
○ Shadow of Recession Concerns: The deeper risk highlighted by Miller Tabak is that if employment data "declines in any meaningful way," it may signal an impending economic recession, which is not the current mainstream expectation in the market. Such concerns could trigger a broader sell-off in risk assets.
● Preliminary Battle: ADP and ISM Data:
○ Wednesday's ADP Employment: Known as the "little non-farm," although it differs from the official non-farm statistical methods, its directional guidance is still highly regarded during sensitive market periods and can provide early clues for Friday's non-farm report.
○ ISM Manufacturing/Non-Manufacturing PMI: To be released on Monday and Wednesday. The market expects manufacturing activity to remain in contraction territory (48.3), while service sector expansion slows (52.3). These data will help piece together the overall health picture of the U.S. economy. Any unexpected weakness could set the tone for trading on non-farm night.
3. FOMC Officials Speak, Powell's Future in Question
Amid the data storm, speeches from Fed officials will provide immediate interpretations of policy thoughts.
● Speech Schedule This Week:
○ Monday at 1:30 AM, 2026 voter, Minneapolis Fed President Kashkari will speak first.
○ Tuesday at 9:00 PM, 2027 voter, Richmond Fed President Barkin will speak. As a mid-generation figure within the Fed, his views are of reference value.
○ Friday at 11:00 PM, Kashkari will return to participate in an online discussion.
● Deep Turmoil: Leadership Crisis and "Shadow Chair": This week's officials' speeches are set against a broader backdrop of turmoil—the Fed's own leadership crisis. Chair Powell's term will end in May this year, and he has yet to indicate whether he will stay on (even if only retaining a board member position). Meanwhile, Trump has announced plans to nominate his own candidate for Fed chair at the beginning of the year, and the stance of this "shadow chair" will continue to disturb the market.
○ Powell's Difficult Decision: If Powell completely leaves after May, Trump will have the opportunity to quickly appoint a new person, thereby gaining majority control of the Fed's board, significantly influencing the direction of monetary policy. If Powell remains a board member, although it may aim to maintain the Fed's independence, he could easily be drawn into political turmoil. His personal decision has become a symbolic event for the Fed's independence.
○ Potential Reshuffling of the Board: Additionally, the Supreme Court will hear a case in January regarding the appointment of Fed board member Lisa Cook. If the ruling is unfavorable to Cook, it could not only lead to her departure but also potentially establish a broader presidential power to dismiss Fed board members, fundamentally altering the relationship between the Fed and the executive branch. These political uncertainties add extra, hard-to-quantify noise to the Fed's monetary policy path this year.
4. Other Market Highlights
● Eurozone Inflation Data: The preliminary CPI for the Eurozone in December will be released on Wednesday. HSBC expects inflation to rise slightly due to the interplay of rising travel service costs and falling energy costs. The data will test the European Central Bank's stance that "rates will remain higher for longer" and will affect the euro exchange rate. If Eurozone economic data continues to improve, it may support the euro; conversely, if the data is weak, technical analysis indicates further downside risk for the euro against the dollar.
● Short-term Headwinds from Commodity Index Rebalancing: Although long-term supported by rate cut expectations and geopolitical risks, precious metals need to be wary of a technical sell-off this week. The Bloomberg Commodity Index (BCOM) will initiate its annual weight rebalancing on January 8. Due to last year's significant gains, silver and gold have passively exceeded their weight in the index, and funds tracking this index will need to sell about $5 billion in silver and $6 billion in gold contracts over the next week to match the new weights. TD Securities warns that this could significantly suppress prices in the short term, compounded by insufficient liquidity after the holidays, potentially amplifying volatility.
● Tech Stocks Facing "Monetization" Pressure Test: After three consecutive years of gains, U.S. stocks are at high valuations, with the market increasingly reliant on earnings growth. This week, although the earnings season has not officially started, the "Tech Spring Festival" CES exhibition and early speeches from the CEOs of Nvidia and AMD will be key events for the market to test the logic of high valuations in tech stocks. Investors are no longer satisfied with concepts but are more focused on the actual commercial monetization capabilities of AI technology. The feedback will directly impact the tech sector's performance at the beginning of the year.
This week, the market will be caught in a complex game of multiple logics: on one side, the risk aversion triggered by the sudden changes in Venezuela, leaning towards pushing up oil and precious metal prices; on the other side, key data that may reveal signs of a slowdown in the U.S. economy, which could both reinforce rate cut expectations (benefiting gold and the stock market) and trigger recession concerns (negatively impacting risk assets).
At the same time, speeches from within the Fed and the deep governance crisis, along with the technical adjustments of the commodity index, are exerting influence on different dimensions. Traders must carefully weigh short-term shocks against long-term trends in this market interwoven with geopolitical storms and data fog. Friday's non-farm report, especially the data revisions within it, is likely to become a key factor in breaking the balance and determining the short-term market direction.
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