Trump said on Wednesday that the U.S. military budget should rise to $1.5 trillion in 2027, well above the $901 billion approved by Congress for 2026. Such a move would require congressional approval, and budget experts are sceptical about the feasibility of such a dramatic increase.

Shares in European arms makers hit a new record high early on Thursday on the back of the news.

U.S. defense stocks are also up but only after being jostled by an executive order released by the White House on Wednesday that called for curbs on defense contractors’ ability to return cash to shareholders:

“Effective immediately, they are not permitted in any way, shape, or form to pay dividends or buy back stock, until such time as they are able to produce a superior product, on time and on budget.” 

During afternoon trading in New York, shares of defense giants Lockheed Martin fell 4.8%, Northrop Grumman slid 5.5%, and General Dynamics dropped 3.6%. Raytheon, a unit of RTX, was singled out by Trump in a Truth Social post, sending the company’s shares down 2%. But all have bounced back in afterhours trading.

Oil prices steadied on Thursday after two days of declines. Trump said on Tuesday that the U.S. would sell up to 50 million barrels of crude oil stuck in Venezuela under U.S. sanctions.

To enable this, the U.S. is "selectively rolling back sanctions" on Venezuelan oil, White House Press Secretary Karoline Leavitt told reporters on Wednesday.

U.S. Energy Secretary Chris Wright also noted yesterday that the revenue from sales of Venezuelan oil would be used to stabilize the country’s economy and eventually repay oil majors Exxon Mobil and ConocoPhillips for losses suffered when their assets were nationalized by former Venezuelan President Hugo Chavez nearly 20 years ago.

Over in Asia, shares of Japanese chemical manufacturers dropped on Thursday while those of their Chinese rivals rose after Beijing’s commerce ministry announced it was launching an anti-dumping probe into imports of dichlorosilane, a chemical used in chipmaking, from Japan. This is yet another sign of the strained bilateral ties between the two nations.

Away from the geopolitical headlines, investors got some U.S. labor market data yesterday, though it offered little clarity.

The JOLTS report showed that U.S. job openings fell to a 14-month low in November while hiring remained sluggish. Employers appear loath to lay off workers, but the quit rate is also low, suggesting workers aren’t optimistic about finding new jobs.

ADP's national employment report showed that private employment rose by 41,000 jobs last month after dropping by 29,000 in November, but investors won’t pay this too much heed, as the ADP figures often diverge significantly from the official government data that drives the Federal Reserve’s interest rate decisions.

The real labor market news is the release of the December non-farm payrolls report on Friday. It is expected to show a drop in the unemployment rate to 4.5% from 4.6% in November.

Would such a move significantly increase the likelihood of more Fed easing? Almost certainly not. For that, we would need to see a more significant move in the unemployment rate toward 5% – something few economists anticipate in the near term.