Introduction: Stock markets fall as Trump renews tariff threats
It looks like it will be a rocky start to the week for investors after Donald Trump threatened eight European countries with new tariffs until they support his ambition to acquire Greenland.
The US president is planning to impose new trade levies of 10% on goods from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland from 1 February, rising to 25% on 1 June.
Investors in Europe are spooked: futures for the continent’s European Stoxx 50 index are down 1.51%. Futures for the UK’s FTSE 100 blue chip index are down 0.48%, while the French Cac 40 is posed to fall 2.1% and the German Dax pointing to a 1.35% drop at the open.
In Asia, the picture has been more mixed as investors digested reports from China that its economy expanded at a 5% annual pace in 2025, though it slowed in the last quarter. In Japan, the Nikkei 225 slipped 0.7%.
Oil prices and the dollar are falling too. Brent crude is down 0.73% to $63.66 a barrel, while West Texas Intermediate is down 0.61% to $59.08 a barrel. The US Dollar index, which tracks the dollar against a basket of other major currencies, is down 0.23%.
And gold, which is seen as a “safe haven” asset during periods of instability, hit another fresh high this morning, rising to as much as $4,689.39 per ounce. It is now trading up around up 1.6% at $4,668. Spot silver is also up by about 3.8% to $93.39 per ounce, after hitting a record high of $94.08.
Jim Reid, of Deutsche Bank, notes while markets are spooked this morning, the shock could wane.
There will be hundreds of different opinions on how this will all pan out but remember that the tariffs announced on Liberation Day were ultimately softened a week later, on the day that long-end US Treasury yields saw a scary Asian session as international investors started to vote with their feet in terms of US funding. So financial markets may play a big part in how this situation resolves itself.
The main Achilles Heel of the US is the huge twin deficits. So while in many ways it feels like the US holds the economic cards, it doesn’t hold all the funding cards in a world that will be very disturbed by the weekend’s events. It also remains to be seen what political benefit there would be for President Trump domestically given that the mid-terms are widely believed to likely be about the cost of living.
In addition, a Reuters/Ipsos poll last week suggested that only 17% of US citizens supported efforts to acquire Greenland, with 47% against. Only 4% approved of using military force with only 8% of Republican voters agreeing.
That all being said, the tariff threats are still very real, he says.
Europe also needs the US in terms of helping with Ukraine. As such expect diplomacy to be going into overdrive over the next 12 days. There has been lots of talk over the weekend around the EU activating its anti-coercion instrument (ACI) which officially came into force at the end of 2023.
It has a high bar to be activated but this episode could well pass that threshold. Macron yesterday called on it to be used but he also wanted it used last year on China and talked of its use with the US after Liberation Day.
One of the problems is that it would likely take months to come to fruition as the formal and legal processes would need to follow due process. Given the extended timeline and potential difficulty in agreeing ACI use, last night EU ambassadors also explored the option of activating the EUR 93bn in retaliatory tariffs that were prepared in response to Trump’s tariffs last year but never implemented.
We’ll find out over the next few days how coordinated Europe is as it tries to respond, with an emergency summit of EU leaders being scheduled for this week, likely Thursday according to Politico.
Elsewhere this morning, chancellor Rachel Reeves is in London this morning, expected to hail a “new golden age” for the City.
This morning new regulatory rules come into effect for businesses considering an IPO or raising capital, reducing paperwork and costs following changes to UK Listing Rules.
She is expected to say:
Two years ago, some said the City’s best days were behind it. They were wrong.
We have taken a significant step forward today and I look forward to continuing to work closely with everyone here to ensure that our capital markets remain world-leading.
As the FTSE 100 reaches record highs and global firms once again choose London, we are seeing the first signs of a new golden age for the City.
London has thrived because it is open, dynamic and forward-looking. With simpler, faster prospectuses and a more competitive listings regime, we are reinvigorating that spirit – making the UK the best place in the world to start, scale and list a company, and ensuring the benefits of this new golden age for the City are felt in jobs and higher living standards in every part of our country.”
Key events
World leaders gather for Davos summit
Trump’s latest threat to revive his trade war with Europe comes as world leaders gather for the World Economic Forum in Davos this week.
The theme this year is a “spirit of dialogue” , with hundreds of leaders flying into the Swiss Alps to make the argument for free trade, geopolitical cooperation and the defence of Ukraine. They include the Nato chief, Mark Rutte and the European Commission president Ursula von der Leyen.
Trump is also expected to attend the summit this week, with the largest US delegation ever seen at the WEF, including the secretary of state, Marco Rubio, the treasury secretary, Scott Bessent, the commerce secretary, Howard Lutnick, and the special envoy Steve Witkoff.
US market will be closed today
While investors are bracing for some pain when the European markets open in about 10 minutes, remember that the US markets will be closed today to commemorate Martin Luther King Jr. Day.
But US futures for now are pointing to a 1% drop when the market opens on Tuesday.
Introduction: Stock markets fall as Trump renews tariff threats
It looks like it will be a rocky start to the week for investors after Donald Trump threatened eight European countries with new tariffs until they support his ambition to acquire Greenland.
The US president is planning to impose new trade levies of 10% on goods from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland from 1 February, rising to 25% on 1 June.
Investors in Europe are spooked: futures for the continent’s European Stoxx 50 index are down 1.51%. Futures for the UK’s FTSE 100 blue chip index are down 0.48%, while the French Cac 40 is posed to fall 2.1% and the German Dax pointing to a 1.35% drop at the open.
In Asia, the picture has been more mixed as investors digested reports from China that its economy expanded at a 5% annual pace in 2025, though it slowed in the last quarter. In Japan, the Nikkei 225 slipped 0.7%.
Oil prices and the dollar are falling too. Brent crude is down 0.73% to $63.66 a barrel, while West Texas Intermediate is down 0.61% to $59.08 a barrel. The US Dollar index, which tracks the dollar against a basket of other major currencies, is down 0.23%.
And gold, which is seen as a “safe haven” asset during periods of instability, hit another fresh high this morning, rising to as much as $4,689.39 per ounce. It is now trading up around up 1.6% at $4,668. Spot silver is also up by about 3.8% to $93.39 per ounce, after hitting a record high of $94.08.
Jim Reid, of Deutsche Bank, notes while markets are spooked this morning, the shock could wane.
There will be hundreds of different opinions on how this will all pan out but remember that the tariffs announced on Liberation Day were ultimately softened a week later, on the day that long-end US Treasury yields saw a scary Asian session as international investors started to vote with their feet in terms of US funding. So financial markets may play a big part in how this situation resolves itself.
The main Achilles Heel of the US is the huge twin deficits. So while in many ways it feels like the US holds the economic cards, it doesn’t hold all the funding cards in a world that will be very disturbed by the weekend’s events. It also remains to be seen what political benefit there would be for President Trump domestically given that the mid-terms are widely believed to likely be about the cost of living.
In addition, a Reuters/Ipsos poll last week suggested that only 17% of US citizens supported efforts to acquire Greenland, with 47% against. Only 4% approved of using military force with only 8% of Republican voters agreeing.
That all being said, the tariff threats are still very real, he says.
Europe also needs the US in terms of helping with Ukraine. As such expect diplomacy to be going into overdrive over the next 12 days. There has been lots of talk over the weekend around the EU activating its anti-coercion instrument (ACI) which officially came into force at the end of 2023.
It has a high bar to be activated but this episode could well pass that threshold. Macron yesterday called on it to be used but he also wanted it used last year on China and talked of its use with the US after Liberation Day.
One of the problems is that it would likely take months to come to fruition as the formal and legal processes would need to follow due process. Given the extended timeline and potential difficulty in agreeing ACI use, last night EU ambassadors also explored the option of activating the EUR 93bn in retaliatory tariffs that were prepared in response to Trump’s tariffs last year but never implemented.
We’ll find out over the next few days how coordinated Europe is as it tries to respond, with an emergency summit of EU leaders being scheduled for this week, likely Thursday according to Politico.
Elsewhere this morning, chancellor Rachel Reeves is in London this morning, expected to hail a “new golden age” for the City.
This morning new regulatory rules come into effect for businesses considering an IPO or raising capital, reducing paperwork and costs following changes to UK Listing Rules.
She is expected to say:
Two years ago, some said the City’s best days were behind it. They were wrong.
We have taken a significant step forward today and I look forward to continuing to work closely with everyone here to ensure that our capital markets remain world-leading.
As the FTSE 100 reaches record highs and global firms once again choose London, we are seeing the first signs of a new golden age for the City.
London has thrived because it is open, dynamic and forward-looking. With simpler, faster prospectuses and a more competitive listings regime, we are reinvigorating that spirit – making the UK the best place in the world to start, scale and list a company, and ensuring the benefits of this new golden age for the City are felt in jobs and higher living standards in every part of our country.”
