BY COMFORT OGBONNA
Asian markets declined on Monday as investors reacted sharply to President Donald Trump’s threat to impose additional tariffs on eight European nations unless the United States is permitted to purchase Greenland. The unexpected geopolitical twist unsettled markets across regions, pushing traders toward safe-haven currencies and assets while adding fresh uncertainty to an already fragile global economic outlook.
Stocks in Asia opened the week on a weak footing. Japan’s Nikkei slid 0.8%, while MSCI’s broad index of Asia-Pacific shares outside Japan dipped 0.1%, reflecting widespread caution. Markets were especially sensitive given the closure of U.S. equity and bond markets for a holiday, which resulted in thinner liquidity and sharper price swings. S&P 500 futures dropped 0.8%, while Nasdaq futures fell 1.1%, signaling that U.S. markets may face a turbulent reopening.
European markets also came under pressure. EUROSTOXX 50 and Germany’s DAX futures each shed 1.1%, and FTSE futures slipped 0.4%, as investors weighed the potential economic fallout from Trump’s tariff ultimatum. The president vowed to raise import levies by 10% starting February 1 for goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain, increasing them to 25% by June 1 if agreements are not reached.
Major EU member states condemned the tariff threat as political coercion, particularly over the disputed Greenland issue. France proposed a series of new, unprecedented economic countermeasures, while European diplomats discussed reviving a suspended tariff package targeting €93 billion ($108 billion) worth of U.S. goods. Officials also hinted at deploying the EU’s Anti-Coercion Instrument, which could affect U.S. services or investment flows.
Analysts at Deutsche Bank said this confrontation risks extending beyond trade. European countries collectively hold about $8 trillion in U.S. bonds and equities—nearly twice as much as the rest of the world combined. George Saravelos, the bank’s global head of FX research, warned that if Europe chooses to weaponize its financial holdings, the impact on global markets could dwarf the effects of traditional trade barriers. He added that the deep interdependence between U.S. and European markets makes the current dispute especially risky.
The escalating tensions are expected to overshadow discussions at the World Economic Forum in Davos, where global leaders, including a large U.S. delegation led by Trump, will gather amid heightened diplomatic strain.
In Asia, Chinese blue chips slipped 0.2% after data showed annual GDP growth slowing to 4.5% in the December quarter—still better than expected but held back by weak domestic demand. Industrial production exceeded forecasts thanks to strong exports, but retail sales disappointed, underscoring uneven momentum in the world’s second-largest economy.
Investors are now watching the Bank of Japan, which meets Friday. While no rate hike is anticipated, policymakers may signal tightening as early as April. Political uncertainty is also rising as Prime Minister Sanae Takaichi is expected to dissolve parliament soon, paving the way for a February election.
Meanwhile, investors await delayed U.S. inflation and consumption data for November, due Thursday. A strong performance in recent U.S. economic indicators has led markets to largely abandon expectations of a rate cut before June. April is now viewed as the most likely meeting where the Federal Reserve could hold steady.
In currency markets, the euro rebounded 0.3% to $1.1628, and sterling recovered to $1.3389. The dollar weakened 0.4% against the Swiss franc to 0.7988 and slipped 0.2% against the yen to 157.80, as traders sought safety. Treasury markets were closed, but 30-year futures fell 9 ticks, reflecting hedging activity linked to potential European liquidation of U.S. assets.
Safe-haven demand was also evident in precious metals. Gold climbed 1.4% to $4,660 per ounce, while silver surged 3.3% to $92.93, both hitting new record highs as investors looked for protection against geopolitical volatility.
Oil prices held steady as markets monitored the potential for conflict in the Middle East. A U.S. Navy carrier strike group is expected to enter the Persian Gulf this week, fueling concerns about a possible confrontation with Iran. Brent inched up 0.2% to $64.29 a barrel, while U.S. crude rose 0.3% to $59.65.
Overall, the combination of trade tensions, geopolitical uncertainty, fragile economic data, and thin holiday liquidity created a tense start to the trading week, leaving global markets bracing for further volatility.
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