Item 1 of 2 Futures-options traders work on the floor at the New York Stock Exchange’s NYSE American (AMEX) in New York City, U.S., January 6, 2026. REUTERS/Brendan McDermid
LONDON, Jan 8 (Reuters) – European defence stocks jumped to a record high and oil prices and the dollar both made ground on Thursday, as geopolitical developments from Venezuela to Greenland kept traders guessing.
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SUBDUED START EXPECTED ON WALL STREET
The euro , meanwhile, flirted with its eighth straight drop against the dollar, with only the mixed U.S. data keeping the dollar bulls in check ahead of Friday’s closely watched non-farm payrolls report. /FRX
“What investors are realising is that the threat of geopolitics is not going away,” Peter McLean, head of multi-asset portfolio solutions at Stonehage Fleming Investment Management, said.
“While it is unlikely we see military action in Greenland there is clearly an impetus to increase defence spending in Europe.”
OIL CLAWS BACK ABOVE $60
Oil prices have slid this week on the prospect of higher Venezuelan crude output, though Brent clawed back above $60 a barrel on Thursday and U.S. crude rose 0.5% to $56.30 a barrel.
“The market’s negative reaction to the Trump comments on controlling Venezuela’s oil looks a little misplaced,” said Daniel Hynes, ANZ’s senior commodity strategist.
“U.S. control of oil sales could actually mean ongoing sanctions or restrictions remaining in place in the short term, which would be bullish for oil prices. I suspect that is why prices are recovering.”
ROBUST START TO YEAR LIFTS GLOBAL MARKETS
Elsewhere, stocks mostly traded lower following a strong start to the New Year that has lifted markets globally.
“It seems the Asian markets are just taking a breather after a strong start to 2026,”
“Geopolitical headlines are in the driver’s seat,” said Charu Chanana, chief investment strategist at Saxo, also pointing to China’s dual-use export ban to Japan, and talk of potential rare-earth risk.
PAYROLLS DATA DUE ON FRIDAY
Investors also digested the tick up in U.S. weekly initial jobless claims ahead of intensely watched non-farm payrolls jobs report due on Friday.
Analysts at Goldman Sachs said they were forecasting an above-consensus 70,000 rise in nonfarm payrolls in December, while expecting the unemployment rate to edge down to 4.5%.
The readings did little to alter market expectations of two more Fed cuts this year . Ten-year Treasury yields were muted at 4.16% and Germany’s 10-year bund yields were at just over 2.83%
“One of the big risk factors this year is the direction of bond yields,” Stonehage Fleming’s McLean said. “If the 10-year Treasury yield does fall below 4 and then fall further, I think that would be a real positive.”
VENEZUELA DEBT RESTRUCTURING ‘CLOSER TO THE BEGINNING’
Venezuela’s default-stricken bonds were finally cooling off following their near 40% surge after the weekend’s U.S. capture of President Nicolas Maduro fuelled investor hopes for a massively complex debt restructuring.
A restructuring is “closer to the beginning than it was six months ago, but we are still not at the beginning yet,” said Richard Cooper, a restructuring Partner at Cleary Gottlieb Steen & Hamilton who represented bondholders in the past.
It will be difficult to start “until you know how much it is going to cost to revive the oil sector and who is going to be in power,” he added.
Additional reporting by Rae Wee in Singapore; Editing by Toby Chopra and Bernadette Baum
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