Stocks, bonds set for jittery start on Venezuela

(Bloomberg) — Global financial markets face a skittish open after the US ousted Venezuela’s president, triggering a fresh flashpoint that may stoke geopolitical tensions and curb the flow of oil from the region.

Currency markets are giving a first read-out before US equity-index futures and US crude futures start trading, with Brent crude opening later. The dollar edged lower versus the euro and the yen in early trading in Australia. Mexico’s peso was indicated weaker in initial quotations in a proxy response to the developments.

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Traders are also watching precious metals such as gold and silver that have recently become a hot segment of the market. But crude will be in the spotlight after the capture of Nicolás Maduro over the weekend, clouding the outlook for supply from the OPEC member.

Although Venezuela isn’t a top-20 crude producer, any persistent increase in oil prices and its inflationary impact on economies pose a risk for markets. Wall Street strategists are generally optimistic about stocks this year, but escalating tensions stand to test the resilience of global equities after their best annual return since 2017.

“The capture of Maduro can create a short-term risk-off sentiment in Asian markets, mainly through higher oil prices and a rise in geopolitical risk premium,” said Jung In Yun, chief executive officer at Fibonacci Asset Management Global in Singapore. “We don’t think the situation will escalate into a sustained oil shock, and this should be a short-lived sentiment drag.”

Early signals suggest that the global oil market will largely take the move in its stride.

Venezuela’s oil infrastructure wasn’t affected after a series of US attacks in Caracas and other states, according to people with knowledge of the matter. Key facilities such as Jose port, the Amuay refinery and oil areas in the Orinoco Belt are still operational, the people said.

The US attack on Venezuela will though likely trigger a short-term oil price gain and a shift to haven assets such as gold, according to Kim Doo-un, an analyst at Hana Securities in Seoul. The dollar is also likely to strengthen in the near term due to heightened uncertainties, Kim wrote in a note.

Investors will also be keeping an eye on US Treasury yields, which can weigh on stocks if they rise too quickly. The 10-year yield was up two basis points to 4.19% at the close on Friday, while the 30-year yield advanced three basis points to 4.87% after touching its highest level since September.