Financial Markets React to Madura’s Capture
January 5, 2026
(158) President Trump’s efforts to replace Madura was pitched originally as a solution to the U.S. Fentanyl problem, but the deeper motive of this still unfolding narrative is a gambit to drive up Venezuelan oil production, cheapen the price of fossil fuel energy and drive faster U.S. GDP growth and the development of artificial intelligence. Venezuela’s oil infrastructure is badly in need of repair, and production has slumped 70% over the past three decades.
By coincidence, the monthly meeting of OPEC plus ministers had been scheduled for this past weekend. Citing political uncertainties, the group reaffirmed its previous decision to delay planned output increases at least through the first quarter of 2026. Aside from the situation in Venezuela, talks to end the Russian war in Ukraine and Middle East unrest represent other uncertainties that need clarification before OPEC decides appropriate next steps on oil production.
The abduction of Venezuelan President Madura is consistent with the possibility of a future pact between the United States, Russia and China that would carve the world into three broad spheres of influence. Think of it as a live-and-let-live agreement that expands the Monroe Doctrine into a global pact dividing the planet between the Western Hemisphere, Eurasia, and East/Central Asia. If this in fact is where the overhauled cold war geopolitics is heading, countries like Taiwan, Ukraine, Iran, Mexico, Japan, and within Europe face possible peril. Where India and Africa will belong in this future remains to be decided. India has nuclear weapons and the fastest growing large economy at the moment. Africa’s share of world population is poised for a rapid increase.
In overnight financial market trading to kick off this first full week of 2026, the dollar advanced 0.4% against the kiwi, won, and Mexican peso, 0.3% versus the euro, Swiss franc, and Canadian dollar, and 0.2% vis-a-vis the kiwi, but it also slid 0.2% against the yen and 0.1% relative to sterling. There were several big jumps in Asian stock markets: 3.0% in Japan, 3.4% in South Korea, 2.6% in Taiwan, 1.4% in China and 1.3% in Indonesia. Share price gains in major European economies and U.S. futures are more measured.
The meteoric rise of precious metal prices such as silver (+4.9%) and gold (+2.2%) was extended overnight. Whereas the 10-year Japanese JGB yield climbed by six basis points, comparable sovereign debt yields fell three basis points in Great Britain and by two bps in the United States, Germany, France, Italy and Spain.
Comments over the weekend by Federal Reserve District Presidents Kashkari of Minneapolis and Paulson of Chicago respectively endorsed the market consensus of two or possibly one further rate cut in 2026 but also suggest that it might be a couple or even several meetings before the next change. President Trump is expected to reveal his Fed Chairman choice early this month.
At the Bank of Israel’s first scheduled review of interest rate policy this year. In light of a 25-basis point cut at the prior review in late November, analysts were not anticipating an interest rate change, but it was instead cut by a further 25 basis points to 4.0%, its lowest level since February 2023. The interest rate had been steady at 4.5% from January 2024 until cut this past November, and its crested at 4.75% from May 2023 until January 2024. A 2.4% year-on-year consumer price inflation rate in November was inside the central bank’s target range of 1-3%, its lowest reading since November 2021, and down from 3.8% a year ago and a cyclical high of 5.4% in January 2023. A rise of over 14% in the Israeli shekel against the dollar during 2025 contributed to the disinflationary trend and was an additional incentive for central bank officials to cut their interest rate again at this month’s review.
Monday hasn’t been a busy day from a data-release standpoint. Among purchasing managers surveys out today for December, the Swiss manufacturing index in December arrived noticeably weaker than expected, pointing to a deepening contraction in spite of a lower tariff on its exports. The PMI reading of 45.8 was down from 49.7 in November and its lowest score in 7 months. Japan’s manufacturing PMI got revised up by 0.3 points to a neutral 50 from a preliminary estimate, and this revision was the first time it wasn’t below the 50 level since June. Thailand‘s manufacturing PMI increased 0.6 points to a 31-month high of 57.6, and Romania‘s measure rose 1.7 points to a 3-month high of 48.9. Saudi Arabia’s non-oil PMI printed at a 4-month low of 57.4, down from 58.5 in November and a 10-month high in October of 60.2. Last but not least, China’s service sector purchasing managers index dipped 0.1 point and, at 52.0, constituted a half-year low, but that economy’s composite PMI of 51.3 was at a 3-month high on the strengthening growth of manufacturing.
Turkish consumer price inflation, whose high point in 2024 had been 75.5%, edged marginally lower to a 49-month low of 30.9% in December, but Turkish producer price inflation of 27.7% last month was up from 22.5% last April and its higher reading in 12 months.
Indonesian CPI inflation edged up to a 20-month high of 2.9% last month, while Serbian producer price inflation settled back to a 2-month low of 1.7% from November’s 10-month high of 2.1%.
In Singapore, a 6.3% year-on-year increase of retail sales last month was the largest gain in 21 months. In Vietnam, sales strengthened even faster, exceeding the December 2024 level by 9.8% and recording an average 9.2% advance in 2025.
Despite a smaller-than-anticipated November trade surplus in Indonesia, the year-to-date surplus (equal to $38.5 billion) was a third larger than the accrued surplus over the first eleven months of 2024.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank of Israel, Kashkari and Paulson, Madura capture, Turkish CPI and PPI
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