Morning brief: Asian markets cautious; major oil companies circle on Venezuela

Asian markets traded mixed on Friday as investors stayed on the sidelines ahead of a key US jobs report and a potentially market-moving Supreme Court ruling on the legality of President Donald Trump’s global tariffs.

At the same time, developments around Venezuela’s oil sector, fresh data on China’s inflation, and a legal challenge by US states over frozen federal funding added to a busy global backdrop.

Asian markets tread carefully

Asian equities drifted lower in early trade, reflecting investor caution before major US economic and political events.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.09%, hovering just below a record high touched earlier in the week.

India's Nifty 50 was down 0.4%.

Japan’s Nikkei bucked the regional trend, rising 1.4%, helped by strong earnings and an upbeat outlook from Fast Retailing, the owner of the Uniqlo brand.

European stock futures pointed higher, up 0.3%, while Wall Street ended the previous session largely flat.

Within US markets, aerospace and defence stocks outperformed, with a key index hitting an all-time high, mirrored by gains in European defence shares.

Heightened geopolitical tensions also pushed oil prices higher.

Investors are focused on two near-term risks: December’s US employment report and a possible Supreme Court ruling on tariffs imposed during Trump’s first term.

Analysts warned that striking down the tariffs could hit government revenue, lift Treasury yields, and trigger fresh volatility.

For now, traders appeared reluctant to take large positions ahead of these events.

US data released on Thursday showed labour demand remained sluggish, reinforcing expectations that the economy is in a “no hire, no fire” phase.

Economists polled by Reuters expect nonfarm payrolls to have risen by 60,000 in December, following a 64,000 increase in November.

The October report showed a sharp loss of 105,000 jobs, largely due to federal employees taking deferred buyouts.

Markets are pricing in at least two Federal Reserve rate cuts this year, although policymakers have signalled fewer cuts beyond that.

The yield on the benchmark 10-year Treasury eased slightly to around 4.17%, while the dollar index hovered near a one-month high against major currencies.

US plans for Venezuela’s oil sector

Oil prices extended gains, with Brent crude rising 0.7% to about $62.46 a barrel, as investors weighed geopolitical risks and developments in Venezuela.

US government-backed efforts to export Venezuelan oil have attracted interest from major oil companies and trading houses, including Chevron, Vitol, and Trafigura.

Talks are expected at the White House, where executives will discuss potential roles in reviving Venezuela’s battered energy sector.

US President Donald Trump, in an interview, said oil companies will invest $100 billion to rebuild Venezuela's oil industry.

The US has indicated it intends to control Venezuelan oil sales and hold proceeds in US accounts, with up to 50 million barrels potentially being sold.

While Venezuela holds the world’s largest oil reserves, years of underinvestment have left infrastructure in disrepair.

Estimates suggest rebuilding could cost as much as $100 billion over a decade, prompting caution among oil executives despite strong political backing from the Trump administration.

China inflation shows mixed signals

In China, data showed consumer inflation accelerated in December to its fastest pace in nearly three years, driven by seasonal food price increases ahead of the Lunar New Year.

Consumer prices rose 0.8% year on year, matching expectations, while monthly inflation came in at 0.2%.

However, underlying demand remained weak.

Core inflation was unchanged at 1.2%, and producer prices fell 1.9% from a year earlier, extending a deflationary streak beyond three years.

For 2025 as a whole, consumer inflation was flat, missing Beijing’s target of around 2%.

Economists cautioned that the property slump and weak job market continue to weigh on spending despite policy support.

US states sue over frozen federal funds

Adding to political uncertainty, five Democratic-led US states, including New York and California, filed a lawsuit against the Trump administration over a freeze on $10 billion in federal aid for child care and other services for low-income families.

The states accused the administration of targeting them for political reasons and of cutting off funds without following required legal procedures.

The White House did not immediately comment.

The case adds another legal challenge to an already complex policy environment, with potential implications for state budgets and social programs.