December 18 Global Market Review: Geopolitical risks push up oil prices, US tech stocks decline nearly 2%, CAD hits new lows against HKD

Global financial markets are experiencing increased volatility, with multiple factors exerting pressure on risk assets. The international situation has heated up, driving a rebound in energy prices, but the US tech sector faces heavy setbacks, cryptocurrencies weaken, and the CAD to HKD exchange rate has fallen to a historic low, showing a comprehensive adjustment pattern.

Market Overview

US Stocks Close: All Decline

• Dow Jones Industrial Average down 0.47%
• S&P 500 down 1.16%
• Nasdaq Composite down 1.81%
• China Golden Dragon Index retraced 0.73%
• Philadelphia Semiconductor Index suffered a heavy blow, down 3.78%

Energy and Precious Metals

• WTI crude oil rose 2.85% to $56.74 per barrel, ending a four-day losing streak
• Gold increased 0.85%, reaching a high of $4349, currently at $4338.8 per ounce

European Stocks Diverge

• Germany DAX 30 down 0.48%
• France CAC 40 down 0.25%
• UK FTSE 100 up 0.92%

Forex and Cryptocurrencies

• US Dollar Index up 0.19% to 98.39
• USD/JPY up 0.63%
• EUR/USD down 0.07%
• CAD to HKD hits a historic low, reflecting continued strength of the US dollar
• Bitcoin down 1.96% in 24 hours, currently at $86,118
• Ethereum down 4.51% in 24 hours, currently at $2,828

Hong Kong Stock Index Futures

• Hang Seng Index night session futures close at 25,304 points, 165 points below yesterday’s close
• China Enterprises Index night session futures close at 8,785 points

Bond Market

• US 10-year Treasury yield approximately 4.15%, unchanged from the previous trading day

Key Drivers

Geopolitical Risks Push Oil Prices Higher

The Trump administration has taken a more aggressive stance on Venezuela, ordering a comprehensive blockade of sanctioned oil tankers entering and leaving the country. This has raised market concerns, increasing pressure on Venezuela’s oil storage, with the national oil company’s daily output nearing 1 million barrels, potentially forcing production cuts.

Consulting firm Rapidan Energy Group warns: the probability of US military action against Venezuela has increased from 40% to 60%, and the likelihood of regime change next year has risen from 60% to 70%. However, given that Venezuela’s daily oil output last month was only 590,000 barrels—far below the levels of 10 years ago—and global daily consumption exceeds 100 million barrels, the short-term impact on global supply remains limited. ING commodities strategist Patterson notes that, given expectations of oversupply in the oil market next year, market concern over supply risks remains moderate.

Additionally, reports indicate the US is preparing to impose new sanctions on Russia’s energy sector if Putin refuses to agree to a peace deal with Ukraine. Proposed measures include sanctions on Russia’s “shadow fleet” of oil tankers and trade transactions involving related traders. These measures could be announced as early as this week.

Tech Stocks Face Dual Blow

Oracle’s stock plunged 5.4% at close, mainly due to negotiations stalling between private credit firm Blue Owl Capital and Oracle over a $10 billion data center project, which will no longer receive financing support. Meanwhile, Nvidia’s stock fell 3.8%, with reports suggesting Google is teaming up with Meta to strengthen support for TPU on the open-source platform PyTorch, aiming to challenge Nvidia’s dominance in AI chips.

Federal Reserve Signals Easing

Fed Governor Waller stated that after a 25 basis point rate cut last week, current interest rates remain slightly restrictive. The Fed still has room to cut rates by 50 to 100 basis points, and the federal funds rate could fall below 3% in the future. Waller emphasized that there is no need to rush rate cuts but to proceed steadily with policy adjustments, and he expects inflation to start declining over the next 3 to 4 months. Waller will be interviewed by Trump on Wednesday afternoon to decide whether to be nominated as the next Fed Chair.

Goldman Sachs released a report indicating that, given the Fed’s recent accommodative policies and cautious stance on the labor market risks, the Fed may be more willing to cut rates further next year than the market expects. This will exert marginal pressure on the US dollar and explains why weak currencies like the CAD to HKD pair have hit new lows—the dollar’s strength is expected to persist.

UK Inflation Unexpectedly Falls, Rate Cut Expectations Rise

UK November CPI rose 3.2% year-on-year, the lowest increase in 8 months, versus an expected 3.5%. Monthly, CPI fell 0.2%. Core CPI rose 3.2% annually, below the forecast of 3.4%. After the data was released, market expectations for a Bank of England rate cut increased significantly, with investors expecting more than 0.68% of rate cuts next year, roughly a 72% chance of three rate cuts. The GBP/USD briefly fell below 1.34, retreating from a two-month high.

Tech and Geopolitical Competition

Google Launches Gemini 3 Flash to Accelerate AI Race with OpenAI

Following the launch of Gemini 3 Pro a month ago, Google has introduced a more efficient and cost-effective Gemini 3 Flash model. The new model outperforms Gemini 3 Pro in benchmark tests, running three times faster than Gemini 2.5 Pro, at only a quarter of the cost of Gemini 3 Pro, priced at $0.5 per million input tokens and $3 per output token. Gemini 3 Flash will replace Gemini 2.5 Flash as the default AI model in Google Search, with users also able to access Gemini 3 Pro and advanced image generation tools.

China’s EUV Lithography Prototype Successfully Developed

Reuters reports that Chinese scientists built an EUV lithography prototype in Shenzhen earlier this year for manufacturing advanced semiconductor chips. The secret project has been described as a “Chinese Manhattan Project,” highlighting Beijing’s determination to match Western capabilities in AI chip technology.

The prototype was developed by former engineers from Dutch chip equipment manufacturer ASML, reverse-engineering ASML’s technology. While the prototype has successfully generated EUV light, it has not yet produced operational chips. The government aims to achieve chip production by 2028, but a more realistic timeline may be 2030. The project operates under the supervision of top CCP officials, with Huawei playing a central coordinating role involving thousands of engineers. EUV lithography is among the most advanced chip manufacturing technologies globally, previously monopolized by Western suppliers. China’s ultimate goal is to produce advanced chips entirely with domestically produced equipment, reducing reliance on US and allied supply chains.

Google and Meta Deepen AI Chip Collaboration

Google is working with Meta to enhance integration of its self-developed AI chips, TPU, with Meta-supported open-source platform PyTorch, aiming to improve performance and meet the needs of various AI model developers. Google is also considering open-sourcing some software components to quickly attract customers, with the long-term goal of breaking Nvidia’s long-standing market dominance.

Today’s Key Events

Trump delivers a nationwide televised speech (ET 9:00 PM); Switzerland November trade balance announced; Bank of England interest rate decision announced; European Central Bank interest rate decision announced; US November unadjusted CPI; US December Philadelphia Fed Manufacturing Index; US initial jobless claims; ECB President Lagarde holds a press conference; US EIA natural gas inventory data.