Geopolitical conflicts push up oil prices, technology stocks come under pressure; the market swings between easing expectations and risks

Market Overview December 18: Global Stocks Generally Retreat, Cryptocurrency Diverges and Fluctuates

The three major US stock indices all declined today, with the Dow Jones Industrial Average down 0.47%, the S&P 500 down 1.16%, and the Nasdaq Composite falling 1.81%. Among them, the Philadelphia Semiconductor Index saw the largest drop, falling 3.78%. In the Hong Kong night market futures, the Hang Seng Index futures are at 25,304 points, down 145 points from yesterday’s close; the China Enterprises Index futures are at 8,785 points. The cryptocurrency market showed divergence and volatility, with Bitcoin down 0.68% in 24 hours, trading at $92,640; Ethereum, on the other hand, rose against the trend by 2.84%, trading at $3,250.

Trump Escalates Sanctions on Venezuela, Oil Prices Rebound Beyond Expectations

International geopolitical tensions heat up once again, reigniting energy markets. Trump ordered a comprehensive blockade on sanctioned oil tankers entering and leaving Venezuela, sparking renewed concerns over global oil supply. Venezuela’s national oil company produces nearly 1 million barrels per day; if storage capacity becomes increasingly tight, some oil wells may face closure risks.

As a result, WTI crude oil prices rose 2.85%, to $56.74 per barrel, ending a four-day losing streak. Gold also increased by 0.85%, reaching a high of $4,349, and closing at $4,338.8 per ounce. According to the assessment by consulting firm Rapidan Energy Group, the probability of the US taking military action against Venezuela has increased from 40% to 60%, and the likelihood of a regime change in Venezuela next year has risen from 60% to 70%. However, given that Venezuela’s oil production is far below the levels of 10 years ago, with nearly 590,000 barrels unloaded onto oil tankers daily last month—still insignificant compared to the global daily consumption of over 100 million barrels. Patterson, head of commodities strategy at ING, stated that due to expectations of a serious oversupply of oil next year, market concern over supply risks has recently decreased.

Meanwhile, the US is preparing to wield new sanctions against Russia’s energy sector. Sources reveal that if Putin refuses to reach a peace agreement with Ukraine, the US plans to impose new sanctions on Russia’s so-called shadow fleet of oil tankers, which are responsible for transporting Russian oil, and also target traders involved in related transactions. The new measures could be announced as early as this week.

Clear Dovish Signals from the Federal Reserve, Powell’s Framework Begins to Emerge

Federal Reserve Board member Waller reiterated at a Yale University event that after a 25 basis point rate cut last week, the current interest rate level remains slightly restrictive, with room for a further 50 to 100 basis points cut, ultimately bringing the federal funds rate below 3% to a neutral level. Waller emphasized that there is no need to rush to cut rates; the Fed can steadily and gradually adjust the policy rate, and inflation is expected to start declining in the next 3 to 4 months.

Waller will be interviewed by President Trump on Wednesday afternoon, seeking the Fed Chair nomination. He stated he will emphasize the importance of Fed independence and believes that biweekly breakfasts with the Treasury Secretary are an appropriate communication channel between the White House and the Fed. Goldman Sachs analysts pointed out that after this week’s dovish policy stance and Powell’s cautious attitude toward labor market risks, the Fed is more willing to cut rates further next year than previously expected. A lower threshold for rate cuts will support a steeper yield curve, exerting marginal pressure on the US dollar, and increasing sensitivity to upcoming labor market data releases.

Worsening Employment Data Concerns, Trump Faces Political Pressure

Trump will deliver a televised address to the nation at 9 PM Eastern Time (10 AM Taiwan Time) on Wednesday evening. The timing is sensitive, as it marks nearly the end of Trump’s first year back in the White House, with declining public support and an economy facing headwinds. The White House revealed that Trump will review the achievements of his administration over the past 11 months and outline policy plans for the next three years, focusing on border security and economic issues.

Latest data raise concerns. The US unemployment rate in November has risen from 4% when Trump took office to 4.6%, exceeding expectations. According to The Wall Street Journal, since 1953, six US presidents experienced rising unemployment rates within the first ten months of their first term, and all but George W. Bush’s party lost at least 12 House seats in subsequent midterm elections.

UK Inflation Unexpectedly Softens, Central Bank Rate Cut Expectations Rise

UK November Consumer Price Index (CPI) rose 3.2% year-over-year, the smallest increase in 8 months, compared to market expectations of 3.5% and the previous 3.6%. Monthly, CPI fell 0.2%, after rising 0.1% previously. Core CPI, excluding food and energy, increased 3.2% year-over-year, below market expectations of 3.4%, and the previous 3.4%.

Following the data release, market expectations for a rate cut by the Bank of England increased significantly. Bloomberg statistics show investors previously anticipated a further rate cut of over 0.68% next year, about 0.1% higher than before the announcement, implying a 72% chance of three rate cuts. The pound retreated from a nearly two-month high, briefly falling below 1.34 against the US dollar.

Tech Stocks Under Pressure, Major Tech Firms Compete for AI Dominance

The technology sector was the biggest loser today. Oracle’s stock closed down sharply by 5.4%, due to stalled negotiations with private equity firm Blue Owl Capital, which will no longer support its $10 billion data center project.

Meanwhile, competition in AI chips is intensifying. Google is deepening collaboration with Meta to enhance the integration of Google’s self-developed AI chip TPU and Meta-supported open-source platform PyTorch, aiming to meet the needs of various AI model developers and weaken Nvidia’s long-standing market dominance. Google is even considering open-sourcing some software to quickly attract customers. Following this news, Nvidia’s stock fell 3.8%.

Google’s latest Gemini 3 Flash has become a key piece in its AI strategy. This model is a low-cost version of the flagship Gemini 3 Pro, scoring even higher than Gemini 3 Pro in benchmarks, with a speed three times that of Gemini 2.5 Pro, and costing only a quarter of Gemini 3 Pro. Priced at $0.5 per million input tokens and $3 per million output tokens, it is slightly more expensive than Gemini 2.5 Flash but outperforms it in performance. Gemini 3 Flash has replaced the 2.5 Flash version in the Gemini application, becoming the default system powering Google Search AI mode.

China Achieves Breakthrough in Domestic EUV Lithography Machines, Chip Autonomy on the Agenda

According to Reuters citing sources, Chinese scientists built a prototype EUV lithography machine earlier this year in Shenzhen for producing advanced semiconductor chips. This project, dubbed the “Chinese Manhattan Project,” highlights China’s ambition to rival Western capabilities in AI chip technology.

The prototype was developed by former engineers from Dutch chip equipment manufacturer ASML, who reverse-engineered ASML’s EUV lithography technology. China’s prototype has successfully generated EUV light but has not yet produced functional chips. The government aims to achieve chip production by 2028, with a more realistic timeline possibly targeting mass production by 2030.

Huawei plays a central role in this project, coordinating a vast network of national research institutes, suppliers, and engineering teams involving thousands of personnel. EUV lithography machines are among the most precise processes in global chip manufacturing, using extreme ultraviolet light to etch ultra-fine circuits onto silicon wafers. China’s ultimate goal is to produce advanced chips using fully domestically produced equipment, reducing reliance on US and allied supply chains.

Forex and Other Market Trends

The US dollar index rose 0.19%, to 98.39. USD/JPY increased 0.63%, EUR/USD declined 0.07%. The US 10-year Treasury yield is approximately 4.15%, unchanged from the previous trading day.

European stock markets were mixed, with Germany’s DAX 30 down 0.48%, France’s CAC 40 down 0.25%, and the UK’s FTSE 100 up 0.92%. The China Golden Dragon Index retraced 0.73%.