High-flying stocks are undermining Trump’s plan to seize Venezuela’s oil reserves

Global stocks retreated from all-time highs and oil fell further on Wednesday as US President Donald Trump’s plan to seize Venezuela’s crude reserves and his latest message on Greenland forced a New Year’s rally to take a breather. Brent crude oil futures fell as much as 1%, heading for a second day of losses after Trump followed up the US capture of Venezuelan President Nicolas Maduro over the weekend by saying the Latin American nation would “hand over” up to 50 million barrels of oil to sell at market prices.MSCI’s broad index of world shares also fell for a second day, retreating from its last record high, as investors also booked gains on high-flying Japanese shares, with Tokyo’s Nikkei average down 1% after hitting a record high on Tuesday.

Uncertainty about what Trump might do next and how China might respond to the risks of disruption to his interests occupied investors’ minds but was difficult to translate into most asset prices, said Florian Ielpo, multi-asset portfolio manager at Lombard Odier Investment Managers.“This new geopolitical environment creates uncertainty that is not yet priced into the markets,” he said.

Investors were balancing the latest tensions with their continued confidence in the so-called “Goldilocks” economic outlook, in which both recession and inflation risks were seen as low, he added.

“It seems we are still expecting Goldilocks, but if we see an acceleration in geopolitical risk, more repricing will follow.”

COMMODITY MARKETS REMAIN FOCUSED ON GEOPOLITICS Stock futures on Wall Street indicated U.S. stocks would be slightly lower in early cash trades.

The dollar was flat against a basket of world currencies and the euro was steady at $1.1691. Commodity markets were fully focused on the implications of Trump’s latest moves.

Trump said on Tuesday that the Caracas government had struck a deal to export $2 billion worth of Venezuelan crude oil to the United States, as he appeared to be working with senior officials in the South American country’s government.

U.S. crude fell 1% to $56.57 a barrel and Brent fell 0.6% to $60.33 after a sharper decline in Asian trading.

Investors have made some gains in gold, which fell 0.8% to $4,461 an ounce after hitting record levels late last month. Copper held on to its all-time high reached on Tuesday, and nickel remained at a 19-month high on concerns about Indonesian supplies.

EUROPE GETS CAUTIONAL TREND Sentiment was stronger in European markets after the latest eurozone inflation report showed price increases slowed to a year-on-year pace of 2% in December, meeting the European Central Bank’s target.

German ten-year Bund yields fell 5 basis points (bps) to just below 2.8%, and the German DAX stock index was 0.6% higher.

The pan-regional ‍Stoxx 600 shares⁠index was flat, partly due to banking stocks, as the outlook for rate hikes that typically boost lenders’ profits deteriorated.

In Britain, the FTSE 100 fell 0.5%, reflecting a global wave of profit-taking after the stock index topped 10,000 for the first time during a New Year’s rally.

Asian stocks were pressured as China announced a ban on exports to Japan of dual-use technologies that could be used for defense, a move analysts saw as a warning to Japanese Prime Minister Sanae Takaichi over support for Taiwan.

Hong Kong’s Hang Seng index closed almost 1% lower and mainland Chinese shares fell 0.3%.

Markets were also trading cautiously ahead of Friday’s US jobs report, which is likely to impact expectations for the interest rate path, with traders currently pricing in two more cuts from the Federal Reserve this year.

US Treasury yields showed little movement, with 10-year yields holding at around 4.15% and two-year yields, which track monetary policy expectations, also flat at around 3.47%.