Markets Overview
- ASX SPI 200 futures down 0.6% to 8,733.00
- S&P 500 down 2% to 6,801.26
- Dow Average down 1.8% to 48,462.58
- Aussie up 0.3% to 0.6733 per US$
- US 10-year yield rose 6.4bps to 4.2866%
- Australia 3-year bond yield rose 4 bps to 4.18%
- Australia 10-year bond yield rose 4 bps to 4.78%
- Gold spot up 1.9% to $4,760.58
- Brent futures up 0.8% to $64.45/bbl
Economic Events
- 10:30: (AU) Dec. Westpac Leading Index MoM, prior -0.04%
Stocks, bonds and the dollar fell after President Donald Trump threatened tariffs on various European countries before high-level meetings in Davos amid a growing standoff over his ambitions to take over Greenland. Bitcoin plunged. Gold hit all-time highs.
The renewed tensions drove the S&P 500 down 2.1%, erasing its 2026 gain. A gauge of equity volatility jumped to the highest since November. Long-term US yields hit a four-month high, with investors also reacting to a rout in Japanese bonds and news that a Danish pension fund is planning to exit Treasuries. The dollar slid against most major currencies.
Going by the average return of the major exchange-traded funds tracking US stocks, Treasuries, corporate bonds and Bitcoin, Tuesday marked the worst session since April’s tariff-induced selloff.
“This is ‘Sell America’ again within a much broader global risk off,” said Krishna Guha at Evercore. “Global investors at the margin are looking to reduce or hedge their exposure to a volatile and unreliable US. What remains to be determined is the magnitude and duration of these dynamics.”
As Trump heads to the World Economic Forum, he’s stoking a series of disputes with European leaders. Trump hectored the UK over plans to turn over sovereignty of Diego Garcia back to Mauritius, threatened eight European countries with tariffs for opposing his Greenland demands, and now he’s trying to force France to join his Board of Peace.
French leader Emmanuel Macron argued that Europe needs to develop more sovereignty to avoid “vassalization and blood politics.” Chancellor of the Exchequer Rachel Reeves said Britain wants to reduce tensions with Trump’s threat of tariffs.
Treasury Secretary Scott Bessent urged calm, comparing the uproar over Greenland to what he called the “hysteria” that followed Trump’s announcement in April of sweeping tariffs. Trump is expected to arrive in Davos Wednesday.
“Tariff fears are back in focus and are now intertwined in geopolitical matters,” said Paul Stanley at Granite Bay Wealth Management. “While this adds a new wrinkle to the tariff issue, we believe cooler heads will prevail and that these tariff threats are being used as a negotiating tactic for control of Greenland.”
Meantime, the US Supreme Court is dashing any hopes of a quick rollback of Trump’s tariffs. The justices are set to start a four-week recess next week without having ruled on pending challenges to most of the duties imposed over the last year.
The S&P 500 saw its biggest drop since October. Small caps also fell, but beat the US equity benchmark for a 12th straight session. A gauge of tech megacaps lost 3.1%. In late hours, Netflix Inc. delivered solid results, but issued a cautious forecast. United Airlines Holdings Inc. beat earnings estimates.
The yield on 10-year Treasuries climbed seven basis points to 4.29%. The slump in Japanese bonds deepened as investors gave a thumbs down to Prime Minister Sanae Takaichi’s election pitch to cut taxes on food. The dollar slipped 0.3%. Bitcoin sank below $90,000. Gold rose past $4,700 an ounce to a record. Oil topped $60 a barrel.
