InvestMacro

The US stock markets closed with a sharp decline: the Dow Jones (US30) fell by 1.76%, the S&P 500 (US500) shed 2.06%, and the tech-heavy Nasdaq (US100) closed lower by 2.39%. The sell-off was triggered by mounting trade risks after President Donald Trump threatened to impose new 10% tariffs on goods from eight European countries starting February 1, which could be hiked to 25% by June, due to their opposition to US control over Greenland. These statements undermined expectations for stable cross-border trade and intensified overall market risk aversion. Stocks were further pressured by rising US Treasury yields, while reports of a Danish pension fund’s plans to reduce its holdings in US Treasuries added to investor anxiety.

The heaviest losses were sustained by major tech companies and semiconductor manufacturers: Nvidia (NVDA) shares dropped 4.4%, Broadcom (AVGO) fell by 5.4%, and Oracle (ORCL) slid 5.8%, as investors actively trimmed positions in high-beta stocks.

The Mexican peso (MXN) weakened to around 17.62 per U.S. dollar, snapping its rally toward July 2024 highs, amid renewed geopolitical and trade frictions that triggered a global flight to safety. New US threats of tariffs on European goods boosted demand for safer, more liquid assets, putting pressure on emerging market currencies, including the peso. Nevertheless, fundamental support for the Mexican currency remains due to attractive domestic asset yields and an increasingly cautious stance from the Bank of Mexico. Mexico manages to maintain one of the highest real yield differentials among emerging markets, supporting capital inflows into peso-denominated fixed-income instruments.

European equity markets mostly declined yesterday. The German DAX (DE40) fell by 1.03%, the French CAC 40 (FR40) closed down 0.61%, the Spanish IBEX 35 (ES35) dropped 1.34%, and the British FTSE 100 (UK100) closed down by 0.67%. The US President Donald Trump ramped up his administration’s efforts to acquire Greenland from Denmark following the imposition of tariffs on key European trading partners, along with a threat to set a 200% tariff on French wines in response to President Emmanuel Macron’s refusal to join Trump’s proposed “Peace Council.” Against this backdrop, banks and insurance companies showed sharp declines, following the global downturn in the financial sector, as rising Japanese government bond yields added pressure to European sovereign debt markets.

WTI crude oil prices rose by more than 1%, climbing toward the $60 per barrel level and recovering from a dip below $59 earlier in the session. The market was supported by reports that Kazakhstan’s largest oil producer temporarily suspended production due to fires at energy facilities. Simultaneously, traders continued to assess the heightened geopolitical tensions between the US and Europe. Ahead of his speech in Davos, President Donald Trump reiterated that the United States must secure control over Greenland. The sharpening rhetoric revived fears of a broader trade conflict between the US and Europe, which could potentially weigh on global economic growth, although the direct impact of these risks on oil prices remains limited for now.
On Tuesday, the US natural gas prices (XNG) surged more than 25% to $3.9 per MMBtu, their highest level in three weeks, as prognoses of a sharp cold snap drove weather-driven price gains. The most severe cold is expected in the final week of January. Meanwhile, gas production remains high, and LNG exports have slightly decreased.

Asian markets declined yesterday. Japan’s Nikkei 225 (JP225) fell by 1.11%, China’s FTSE China A50 (CHA50) dropped 0.90%, Hong Kong’s Hang Seng (HK50) shed 0.29%, and Australia’s ASX 200 (AU200) posted a negative result of 0.66%.

The Australian dollar (AUD) held near a two-week high on Wednesday as the US currency continued to be weighed down by intensifying geopolitical tensions. Investors are also focused on the upcoming release of Australian labor market data, which could influence monetary policy expectations. Projections point to a recovery in employment for December by approximately 30,000 people following an unexpected contraction in November, while the unemployment rate is expected to rise slightly to 4.4%, in line with Reserve Bank of Australia (RBA) estimates. Weaker-than-expected figures would reduce the likelihood of a rate hike in the near term.

The New Zealand dollar (NZD) traded near $0.583, remaining close to a three-week high amid a weakening US dollar caused by renewed trade tensions between the US and the EU. On the domestic front, a series of encouraging macroeconomic data points toward an accelerating economic recovery in New Zealand, bolstering expectations that the Reserve Bank of New Zealand (RBNZ) will begin tightening monetary policy in the second half of the year. While markets are pricing in almost no change for the February meeting, the probability of a rate hike by July already exceeds 50%.

The US stock indices did not trade yesterday due to a bank holiday.

The Canadian dollar (CAD) strengthened above 1.39 against the US dollar. The currency was supported by a weakening US dollar and a mixed but overall moderately positive interpretation of the latest Canadian inflation data. The headline Consumer Price Index (CPI) unexpectedly rose to 2.4% in December, exceeding market expectations and coming in slightly above the Bank of Canada’s (BoC) short-term projections, which had anticipated inflation fluctuations near the 2% target. At the same time, median core inflation fell to a yearly low of 2.5%, indicating a partial easing of underlying price pressures. However, the combination of higher headline inflation and persistent demand reinforced the case for a more cautious approach by the Bank of Canada regarding the timing and pace of potential interest rate cuts.

European equity markets mostly declined on Monday. The German DAX (DE40) dropped by 1.34%, the French CAC 40 (FR40) closed down 1.78%, the Spanish IBEX 35 (ES35) fell by 0.26%, and the British FTSE 100 (UK100) closed at negative 0.39%. The DAX (DE40) slid to its lowest level since January 6, amid deteriorating sentiment in European markets due to the threat of renewed trade tensions between the US and the EU. The US President Donald Trump announced intentions to impose 10% tariffs starting February 1 on all imports from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland, warning that the rate could be increased to 25% in the absence of an agreement on the “full and final purchase of Greenland.” These statements heightened investor fears of trade escalation, especially following reports that the European Union is considering retaliatory measures, including tariffs on US goods worth up to 93 billion euros or restricting US companies’ access to the European market. Against this backdrop, automaker stocks plummeted: shares of BMW, Volkswagen, Daimler Truck, Porsche, and Mercedes-Benz lost up to 3.7%, reflecting the sector’s vulnerability to trade barriers.

The Swiss franc (CHF) strengthened to around 0.798 per US dollar, holding near 2011 highs as escalating geopolitical rhetoric from the US boosted demand for safe-haven assets. The rally was triggered by President Donald Trump’s statements regarding the intent to impose new tariffs on European goods over the Greenland dispute, which increased global market nervousness and supported haven currencies. Investors are also focused on the upcoming World Economic Forum in Davos, starting January 20. Key global central bankers, including Swiss National Bank Chairman Martin Schlegel, are expected to speak. Markets continue to operate on the assumption that the SNB will maintain its key interest rate at 0% for the foreseeable future.

On Tuesday, silver (XAG) traded near $94.5 per ounce, remaining at record-high levels amid rising demand for safe-haven assets due to escalating tensions between the US and Europe. Additional volatility in the silver market in recent sessions was driven by the Trump administration’s decision to forgo tariffs on essential minerals, including silver, which was added to the US critical minerals list last year due to its key role in green energy technology and electronics.
Platinum prices (XPT) declined to approximately $2,340 per ounce but remained near record levels amid increased demand for precious metals as haven assets due to the worsening tensions between the US and Europe. Analysts note that Europe holds approximately $10 trillion in US bonds and stocks, part of which is held in sovereign wealth funds and could potentially be used as leverage in the new trade confrontation. Additional volatility in the platinum market in recent sessions came from Trump’s decision to temporarily hold off on tariffs for key minerals, including platinum, instead instructing the administration to seek alternative suppliers among international trade partners.

The US natural gas prices jumped more than 17% to $3.65 per MMBtu, sharply rebounding from a 13-week low of $3.10 recorded last week. The surge was driven by an intensifying Arctic cold wave sweeping across much of the country. A sudden shift from mild weather prognoses to a scenario of severe and prolonged cold triggered a rapid market re-evaluation as traders began pricing in significantly higher heating fuel demand.

Asian markets declined yesterday. Japan’s Nikkei 225 (JP225) fell by 0.65%, China’s FTSE China A50 (CHA50) dropped 1.13%, Hong Kong’s Hang Seng (HK50) shed 1.05%, and Australia’s ASX 200 (AU200) posted a negative result of 0.33%.

On Tuesday, the offshore yuan stabilized near the 6.96 level per dollar, remaining close to a 32-month high following the Chinese central bank’s decision to leave loan prime rates unchanged. The People’s Bank of China (PBoC) kept the one-year and five-year benchmark rates at 3.0% and 3.5%, respectively, extending the period of policy stability to eight months and confirming a course of targeted economic support rather than broad-based monetary easing.

On Friday, US stock markets generally ended the session without a clear direction amid mixed geopolitical signals, uncertainty surrounding future Federal Reserve policy, and the start of the fourth-quarter earnings season. By Friday’s close, the Dow Jones (US30) declined by 0.17% (-0.28% for the week). The S&P 500 (US500) shed 0.06% (-0.06% for the week). The tech-heavy Nasdaq (US100) closed 0.07% lower (-0.34% for the week). Investors also assessed political news: President Donald Trump signaled that he might keep economic advisor Kevin Hassett in his current role rather than nominating him as Fed Chair, fueling speculation that former Fed Governor Kevin Warsh could be the frontrunner for the position.

Equity markets in Europe mostly fell on Friday. Germany’s DAX (DE40) fell by 0.22% (+0.19% for the week), France’s CAC 40 (FR40) closed down 0.65% (-1.00% for the week), Spain’s IBEX 35 (ES35) gained 0.39% (+0.94% for the week), and the UK’s FTSE 100 (UK100) closed at negative 0.04% (+1.09% for the week). Attention was also on macroeconomic data: German inflation in December 2025 was confirmed at 1.8%, dropping from 2.3% in November and falling below the ECB’s 2% target for the first time since September 2024.

European stock markets opened sharply lower on Monday following the escalation of trade risks after US President Donald Trump’s statements regarding potential new tariffs on goods from eight European countries. The measure is viewed as a leverage tool to pressure these nations into supporting the Greenland acquisition plan. According to Trump, NATO allies opposing the plan, including Denmark, Norway, Sweden, Finland, Germany, the UK, France, and the Netherlands, could face 10% tariffs as early as February 1, rising to 25% in June if no agreement is reached. In response, European leaders have begun discussing potential countermeasures, including reviving last year’s initiatives to impose tariffs on American goods, while French President Emmanuel Macron reportedly called for the activation of the EU’s anti-coercion instrument.

On Friday, silver (XAG) fell by more than 4%, dropping below $88.7 per ounce, continuing a sharp decline following high volatility in the previous session as the US decision to refrain from imposing tariffs on critical minerals removed a key market driver. Earlier in the week, threats of potential US import tariffs triggered a rapid rally in commodities: silver and other metals hit record levels as traders rushed to direct shipments to the US before potential restrictions took effect.
WTI crude oil prices traded near $59.3 per barrel on Monday following a fourth consecutive week of gains, as the market entered a consolidation phase amid easing geopolitical tensions surrounding Iran. Supply disruption concerns moderated after US President Donald Trump suggested a potential delay in military action last week, following Tehran’s pledge to halt the execution of protesters. However, renewed trade conflict risks remain a significant source of uncertainty for global energy demand. Over the weekend, the US President announced plans to impose 10% tariffs on goods from eight European countries effective February 1, with the potential to increase the rate to 25% by June, absent an agreement on the “purchase of Greenland.” These developments have intensified fears of a global economic slowdown and subsequent downward pressure on oil demand.

Asian markets traded with mixed results last week. Japan’s Nikkei 225 (JP225) rose by 5.00%, the FTSE China A50 (CHA50) fell by 1.54%, Hong Kong’s Hang Seng (HK50) gained 1.77%, and Australia’s ASX 200 (AU200) showed a 5-day positive result of 1.95%.

On Monday, the offshore yuan strengthened to approximately 6.96 per dollar, reaching a 32-month high supported by the People’s Bank of China (PBoC), which set its strongest daily fixing in over two years. This factor outweighed mixed economic data: China’s Q4 GDP growth slowed to 4.5% from 4.8% in Q3, the weakest pace in nearly three years, yet still exceeded market expectations of 4.4%. For the full year, the economy grew by 5%, meeting the government’s target and matching 2024 growth rates, largely due to a record trade surplus as robust exports to non-US markets offset pressure from American tariffs. Meanwhile, December statistics pointed to weakening domestic consumption and an accelerating decline in investment, while industrial production showed improvement.