Image Source: Pixabay
 

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%.

S&P 500 (US500) 6,796.86 −143.15 (−2.06%)

Dow Jones (US30) 48,488.59 −870.74 (−1.76%)

DAX (DE40) 24,703.12 −255.94 (−1.03%)

FTSE 100 (UK100) 10,126.78 −68.57 (−0.67%)

USD Index 99.58 −0.82% (−0.83%)

News feed for: 2026.01.21

• UK Inflation Rate (m/m) at 09:00 (GMT+2); – GBP (HIGH)
• Eurozone ECB President Lagarde Speech at 09:30 (GMT+2); – EUR (LOW)
• US Pending Home Sales (m/m) at 17:00 (GMT+2). – USD (MED)

More By This Author:

Natural Gas Prices Jumped More Than 17%
Trump Escalates Trade Risks With Europe Over Greenland
Oil Tumbles 5%; Tech Rally Pushes US Stocks Higher