Markets Overview

  • ASX SPI 200 futures down 0.4% to 8,810.00
  • Aussie up 0.5% to 0.6714 per US$
  • Australia 3-year bond yield rose 3.5 bps to 4.14%
  • Australia 10-year bond yield rose 3.4 bps to 4.74%
  • Gold spot up 1.6% to $4,670.73
  • Brent futures little changed at $64.11/bbl

Economic Events

Stocks slumped and gold hit a fresh record as trade tensions between the US and Europe flared over President Donald Trump’s push to take control of Greenland.

Futures for the S&P 500 fell nearly 0.9% while those for the Nasdaq 100 sank 1.1%. Europe’s Stoxx 600 headed for its worst day in two months, fueled by losses in luxury and auto shares. Gold topped $4,670 an ounce. The dollar dipped 0.3% as the Swiss franc outperformed. US markets were shut for a public holiday.

Trump’s threat to impose levies on countries opposing his bid to claim authority over Greenland risks reigniting the volatility that rattled markets in the early months of his second term. The selloff deepened after European officials signaled they were unlikely to back down and were considering retaliation.

“The nervousness is palpable,” said Alexandre Baradez, chief market analyst at IG in Paris. “All in all, you have so many issues piling up — from credit cards to the independence of the Fed and tariffs — that I really don’t see the case for stock markets to keep on breaching new records.”

The standoff is happening at a time when risk appetite has been supported by resilient earnings and sustained investment in artificial intelligence. The outlook will hinge in part on the European Union’s response, with the bloc in talks to impose tariffs on €93 billion of US goods.

French President Emmanuel Macron intended to request the activation of the EU’s so-called anti-coercion instrument, Bloomberg reported over the weekend. German leader Friedrich Merz, however, said Monday that Germany’s heavier dependence on exports means it’s less willing to unleash the countermeasure.

“The key element to watch in the coming days is whether the message translates into formal measures or remains purely rhetorical, which would make a clear difference in the market reaction,” said Francisco Simón, European head of strategy at Santander Asset Management.

US 10-year Treasury futures fell, implying a two basis-point increase in the corresponding cash yield. German rates retreated at the short end as traders bet a sustained trade war could open room for interest-rate cuts. Longer-dated yields rose on concerns governments may issue more debt to support growth.

The tensions are also adding to the significance of a pending US Supreme Court ruling on some of Trump’s earlier tariffs, with a decision possible as soon as Tuesday.

Trump’s threats raise the possibility of European governments trimming their holdings of US assets, supporting the euro, according to George Saravelos, Deutsche Bank’s global head of FX research.

Europe is the US’s largest lender, owning $8 trillion of US bonds and equities, almost twice as much as the rest of the world combined. The common currency rose 0.4% on Monday.

“The key thing to watch will be whether the EU decides to activate its anti-coercion instrument,” Saravelos said. “It is a weaponization of capital, rather than trade flows, that would by far be the most disruptive to markets.”

Some traders expect the swings to be short-lived, seeing the pullback as an opportunity to add exposure to stocks.

“My working assumption is that an ‘off-ramp’ from these threats will soon be found,” said Michael Brown, senior research strategist at Pepperstone. “With the fundamental bull case for risk still a resilient one, and providing that any European retaliation remains largely rhetorical, I would view equity dips as buying opportunities.”

Traders are also watching Japan, where Prime Minister Sanae Takaichi set Feb. 8 for an early election. Takaichi is seeking a mandate for her vision of fiscally responsible expansionary policies to boost growth. Earlier on Monday, the yield on 10-year Japanese debt rose to the highest levels since 1999.