US Stock Futures Decline Amid Trump's Tariff Threats
US stock futures fell sharply on Monday. Markets reacted negatively to President Donald Trump's threat to impose additional tariffs on eight European countries. This move followed Washington's demand to purchase Greenland, which has heightened fears of a broader transatlantic trade conflict.
Market Movements and Safe-Haven Demand
S&P 500 futures slid approximately 0.7%. Nasdaq futures dropped 1.0% in thin trading. US equity and bond markets remained closed for a holiday, contributing to the light volume.
The dollar weakened against traditional safe-haven currencies. It slipped against the Japanese yen and the Swiss franc, according to Reuters reports. Gold and silver prices climbed to record highs as investors sought safety. Oil prices eased amid concerns that an escalating trade dispute between the United States and Europe could hurt global growth and demand.
Global Market Sentiment Weakens
In Europe, market sentiment also turned weaker. EUROSTOXX 50 futures and Germany's DAX futures both declined 1.1%. In Asia, Japan's Nikkei index fell 1.0%. MSCI's broad index of Asia-Pacific shares outside Japan edged 0.1% lower.
Trump's Tariff Announcement and European Response
President Trump stated he would impose additional 10% import tariffs starting February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain. He added that the duties would rise to 25% from June 1 if no agreement is reached.
Major European Union countries condemned the tariff threat. They described it as an attempt at economic coercion linked to Greenland. EU options include retaliatory tariffs on €93 billion worth of US imports, which were approved last year but suspended for six months in early August. The bloc could also take steps under its Anti-Coercion Instrument, potentially targeting US services trade or investments.
Analyst Warnings and Financial Interdependence
Analysts at Deutsche Bank highlighted that European countries hold around $8 trillion in US bonds and equities. This amount is nearly twice as much as the rest of the world combined. They suggested European nations could consider repatriating some of those investments.
George Saravelos, the bank's global head of foreign exchange research, commented on the situation. He said, "With the US net international investment position at record negative extremes, the mutual interdependence of European-US financial markets has never been higher." He warned that using capital flows as leverage would be far more disruptive to markets than tariffs alone.
Impact on Global Events and Economic Data
The standoff is expected to overshadow discussions at the World Economic Forum in Davos this week. Leaders from around the world will gather there, including a large US delegation led by Trump.
In Asia, investors awaited Chinese economic data due later on Monday. Growth is expected to slow to 4.4% in the December quarter from 4.8% previously. Weak domestic demand is offsetting strength in exports and manufacturing.
Attention is also on the Bank of Japan's policy meeting on Friday. While no interest rate hike is expected, policymakers may signal a possible tightening as early as April. Political uncertainty adds to the backdrop, with Prime Minister Sanae Takaichi expected to dissolve parliament ahead of a February election.
US Economic Indicators and Corporate Earnings
In the United States, delayed data on core inflation and consumer spending for November are due on Thursday. These figures are likely to shape expectations on when the Federal Reserve might cut interest rates again. Strong recent economic data have led markets to push back expectations for easing until at least June.
Corporate earnings remain in focus this week. Results are due from companies including Netflix, Johnson & Johnson, General Electric, and Intel, alongside major banks.
Currency and Commodity Markets Update
In currency markets, the euro rose 0.1% to $1.1613 after an early dip. Sterling edged up to $1.3387. The dollar fell 0.2% against the Swiss franc and 0.3% against the yen.
US Treasury cash markets were closed, but 10-year futures edged higher as investors looked for safety. Gold climbed 1.5% to $4,664 an ounce.
Oil prices slipped, with Brent crude down 0.5% at $63.84 a barrel and US crude off 0.4% at $59.18. Traders remained cautious amid concerns over rising tensions in the Middle East. A US Navy aircraft carrier group is expected to arrive in the Persian Gulf this week.
