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- US President Trump has pledged to increase defense spending by $1.5 trillion in 2027, leading to a rise in defense stocks.
- A deal between the US and Venezuela has been reached, where Venezuela will purchase US goods with its revenue from oil sales.
- Macro data showed a mixed global picture. Eurozone inflation eased to 2%, keeping the European Central Bank on hold, while US data pointed to softer jobs but resilient services. Swiss inflation edged up to 0.1%.
Wrapping up the trading week, an extraordinary mix of geopolitical developments and economic data has shaped movements across global markets.
Defense stocks surged following President Trump’s announcement of a huge military spending proposal, while his administration’s operations in Venezuela added further market volatility.
Meanwhile, inflation data from the eurozone and Switzerland showed continued moderation, and US labor market indicators painted a mixed picture ahead of today’s critical employment report.
Defense Stocks Surge on Trump’s Military Spending Boost
Global defense stocks rallied yesterday after US President Trump announced a budget of $1.5 trillion in military spending in 2027 after he negotiated with US senators. Lockheed Martin rose 4.34%, alongside other defensive stocks. The German DAX hit a new record high at 25,170, with German defense stocks leading the way. ⁽¹⁾
Despite the huge defense spending, Trump has pledged to block defense contractors from paying dividends or initiating stock buybacks unless they speed up weapons production. Trump and the Pentagon criticized the defense industry for being too expensive and slow, and vowed to make weapons production faster and more efficient. ⁽²⁾
This occurred after last week’s US military operations in Venezuela. Since then, Trump also said the US will take control of Venezuelan oil and considered acquiring Greenland.
Venezuela Oil Deal Revenue Will be Used to Buy US Goods
President Trump stated that Venezuela will purchase American goods with the revenue it generates from its oil sales. Trump said that the purchases will include agricultural products, medicine, and equipment to improve Venezuela’s infrastructure. ⁽³⁾
Trump said on Tuesday that Venezuela would turn over 30-50 million oil barrels to the US, and the oil will possibly be sold at market prices. If executed, the sale would total more than $2 billion at oil’s Wednesday closing price.
Eurozone CPI Eases to 2%, Keeping the ECB on Hold
Eurozone inflation came in at 2% in December, lower than November’s figure of 2.1%, but aligned with estimates and the European Central Bank’s target. Core inflation came in at 2.3%, lower than the estimated figure of 2.4%, the same as November’s figure. ⁽⁴⁾
The ECB kept interest rates steady at 2% in December for the fourth straight meeting, after last cutting rates in June. The move came as eurozone inflation reached 2% and followed a rate-cutting cycle that lowered rates from a 2024 peak of 4%.
US Data Showed a Mixed Picture Across Labor and PMI Data
US data showed a mixed picture this week, with job openings coming in at 7.15 million, below its forecast of 7.61 million. ADP employment change showed an increase of 41,000 jobs in the private sector, showing a rebound from November but came in lower than its forecast of 49,000. Hiring also slowed significantly, with both openings and actual hires down from prior months. ⁽⁵⁾
The focus will now turn to today’s labor market data releases, with NFP forecasted at 60,000, while the unemployment rate is expected to decline slightly to 4.5%.
ISM PMI data showed a mixed picture, with the manufacturing PMI coming in at 47.9, remaining in contraction territory. New orders contracted further and input costs grinded higher as the sector continues to bear the imprint of President Donald Trump’s import tariffs. ⁽⁶⁾
However, services PMI stayed in expansion mode, coming in at 54.4, higher than expected due to strong business activity in the sector. Exports rebounded after contracting for five months straight. ⁽⁷⁾
Switzerland CPI Edges Back into Positive Territory
Switzerland’s annual inflation rate returned to positive territory in December, reaching 0.1% after a flat reading of 0% in November, according to government data released on Thursday. ⁽⁸⁾
Switzerland’s December CPI came in at 0.1%, matching estimates and rebounding from the previous flat inflation reading, but still remained at the lower end of the Swiss National Bank’s target range of 0-2%.
The central bank signaled it is comfortable with inflation dipping slightly below its target for a short period, although December’s data still kept inflation within that range. The small rise in prices highlights how Switzerland continues to see much lower inflation levels than most other European countries. ⁽⁹⁾
