The IBEX 35 traded with a slight uptick on Tuesday, extending the gains from the first two sessions of the year, in what was expected to be a lighter day due to the Epiphany holiday, with investors keeping a close watch on developments in Venezuela and upcoming US employment data.

The market appears to have calmly digested the latest events in Venezuela, after Donald Trump sent US troops to Caracas on Saturday to capture President Nicolás Maduro and transfer him to New York, where on Monday he pleaded not guilty to drug trafficking charges.

For now, the impact on risk appetite is limited, given the perception that there will not be major destabilization or a prolonged war in the South American country, whose economy is relatively small despite its vast oil reserves.

Trump plans to meet this week with US oil executives to discuss Venezuelan production, and Republican lawmakers have stated that Washington does not intend to occupy or rebuild Venezuela. Additionally, a CIA assessment presented to President Donald Trump concluded that senior officials loyal to Nicolás Maduro, including Vice President Delcy Rodríguez, are best positioned to maintain stability in the country following Maduro's ouster.

On the macroeconomic front, investors are anticipating at least two interest rate cuts from the Federal Reserve (Fed) this year and are awaiting Friday's monthly US labor market report to refine their bets.

Minneapolis Fed President Neel Kashkari said on Monday that inflation is moderating slowly, but there is a risk of a rise in unemployment, which has heightened expectations for a rate cut.

For the Fed's January 28 decision, markets are currently pricing in an 84% probability that interest rates will be held steady, according to data from IRPR, a monetary futures tool from LSEG.

Against this backdrop, at 0805 GMT on Tuesday, Spain's blue-chip IBEX 35 index was up 44.90 points, or 0.25%, at 17,659.30 points, while the pan-European FTSE Eurofirst 300 index advanced 0.31%.

In the banking sector, Santander rose 0.66%, BBVA gained 0.44%, Caixabank advanced 0.28%, Sabadell added 0.70%, Bankinter climbed 0.70%, and Unicaja Banco was up 0.07%.

Among major non-financial stocks, Telefónica gained 0.52%, Inditex slipped 0.39%, Iberdrola fell 0.51%, Cellnex rose 0.55%, and oil company Repsol climbed 0.68%.

(Reporting by Tomás Cobos; editing by Benjamín Mejías Valencia)