Traders Turn to Safe Havens, Defense as Oil Falls on U.S. Maduro Capture
By Dow Jones Newswires StaffOil prices slipped as global markets and U.S. futures took the U.S. arrest of Venezuela President Nicolas Maduro--and President Trump's promise to open up the country's oil reserves--in their stride. Traders turned to safe-haven assets and bulked up on defense stocks, as the biggest market movements in early European trading came away from oil majors. Though Venezuela holds the world's largest proven oil reserves, the petrostate today pumps less than 1% of global crude supplies and much of its production capacity and infrastructure is unfit for purpose. Investors sought safety in dollar and precious metals following the news, while Bitcoin held above $92,000.U.S. Futures were largely up premarket, with futures for the Dow Jones Industrial Average--which includes major banks and miners--trading up 0.7%. The S&P 500 was up 0.2% though the tech-heavy Nasdaq traded flat, despite gains for tech stocks in Europe and Asia.Asian markets were mixed. Japan's Nikkei 225 index climbed 3% on gains for industrials and utilities. China's benchmark Shanghai Composite gained 1.4%, with gains for semiconductor companies, though Hong Kong's Hang Seng traded flat.European indexes opened higher as traders turned to defense stocks following the weekend's events. Weapons manufacturer Leonardo surged 5.7% and Rheinmetall jumped 6.4%, spurring Italy's FTSE MIB up 0.7% and the German DAX to rise 0.8%. Spain's IBEX 35 gained 0.55% while the French CAC 40 was up 4%, with both indexes pushed up by defense companies. U.K. oil majors were muted despite events in Venezuela, with Shell and BP nudging down slightly. Gains for miners pushed London's FTSE 100 up 0.4%. Elsewhere, semiconductor stocks push the Netherlands' AEX index up 1.1%.The dollar rose against a basket of currencies as it benefited from its safe-haven status. "The market reaction has so far been relatively muted and in a slight risk-off direction," RBC Capital Markets strategists said in a note. Investors are looking ahead to U.S. data with the ISM manufacturing report due at 1500 GMT. The DXY dollar index rose 0.3% to 98.682 after reaching a near four-week high of 98.796 overnight.The Swiss franc also gained on its safe-haven status, with the currency hitting a near seven-week high overnight. The euro traded flat at 0.9283 francs after reaching a low of 0.9268 overnight.U.S. Treasurys traded marginally lower in Asian afternoon hours. The 10-year Treasury yield fell 1.2 basis points to 4.176%, with oil supply shocks typically less important for U.S. Treasurys than demand shocks, according to Capital Economics' Thomas Mathews and Jonas Goltermann.Eurozone government bonds shrugged off the weekend's developments, trading little changed, similarly to U.S. Treasurys. A bigger driver for eurozone government bonds will be issuance as the single currency area's sovereigns kick off their annual funding programs, pointing to a busy primary market in January, as usual. The 10-year German Bund yield edged up 0.2 basis points to 2.901%.Bitcoin gained since the news in Venezuela broke as some estimates suggest Venezuela is sitting on a large shadow reserve of more than 600,000 coins, Swissquote Bank analyst Ipek Ozkardeskaya said in a note. Bitcoin supply could be affected if these assets are seized by the U.S. due to narco-terrorism charges or held in strategic reserves, she said. Bitcoin rose 1.4% to $92,534, having reached a near four-week high of $93,221 overnight.Crude prices fell in early European trading. Brent crude was down 0.8% at $60.24 a barrel, while West Texas Intermediate traded down 1.2% at $56.63 a barrel. President Trump said U.S. oil companies will spend billions of dollars to fix the Latin American country's energy infrastructure, though the embargo on Venezuelan oil remains in effect.Gold prices climbed in early trading along with other precious metals. York gold futures rose 2.5% to $4,439.10 a troy ounce, while silver was up 6.3% to $75.51. Platinum futures climbed 4.5% to $2,125.70 an ounce.Copper prices climbed in early trading amid a broader risk-on mood across markets and concerns over tightening supply. "Fears of potential U.S. import tariffs have prompted traders to accelerate shipments to the U.S., tightening availability elsewhere," MUFG's Soojin Kim wrote. Meanwhile, a strike at Chile's Mantoverde mine underscores supply-side risks amid expanding global demand. Futures on the London Metal Exchange rose 2.9% to $12,818.50 a metric ton after having risen roughly 40% last year.Write to Barcelona Editors at [email protected]