- Tit for tat tariff threats weigh on global indices
- Starmer to address nation as Europe wields €93 billion retaliatory baton over Greenland
- CEOs and world leaders head to Davos in search of the spirit of dialogue
- Gold back at record highs
- US markets closed ahead of a busy week for data and earnings
- Oil price retreats as focus shifts to demand
Derren Nathan, head of equity research, Hargreaves Lansdown:
“UK and European markets are tracking Asian markets downwards this morning after an extraordinary weekend of economic sabre-rattling over Greenland. Donald Trump’s given eight countries, including three of the World’s largest economies, until 1 February to clear the path for the US acquisition of Greenland, or face a 10% tariff, which could rise to 25% in time. The European Union has hit back with a proposed €93 billion tariff package and has dusted off its never-before-used ACI (anti-coercion instrument), which would further limit US companies’ access to major contracts across the single market.
The UK is yet to make a formal response, but the Prime Minister will address the nation today at 2:30pm after reiterating his opposition to Washington’s desire to take control of Greenland in a call with Donald Trump on Sunday. The market reaction to this escalation has been relatively muted compared to the post-liberation day sell-off seen last April. Given the President’s history of dramatic threats and last-minute stand-downs, investors may be pricing in a generous degree of bluff in this high-stakes poker game.
However, markets are close to record-highs. If this year’s theme of the ‘Spirit of Dialogue’ at the World Economic Forum in Davos turns out to be more ironic than prophetic, there’s scope for a steeper dip in risk-on assets. With everyone from Presidents Trump & Zelensky through to NVIDIA’s CEO descending on the alpine village this week, the flies on the wall should be party to some tense conversations. The elevated tension level hasn’t been lost on safe-haven investors either, with gold at fresh highs as it approaches the $4,700 per ounce barrier.
This also reflects dampened expectations for an imminent rate cut by the Fed after recent economic data suggested continuing strength in the US economy. American markets are closed today in memory of Martin Luther King Junior, but futures across the Atlantic are also pointing downwards. While investors will be closely following events in Switzerland, there’s plenty of news expected on American soil this week. PCE inflation figures and fourth-quarter GDP are the key metrics that rate setters will be looking at. Forecasts are expecting strong economic growth of around 5.3% and a month-on-month uplift of 0.46% to core prices in the delayed PCE number from November.
In the business world, earnings from Netflix through to Procter & Gamble and United Airlines will help to paint a more granular view of the state of the Economy. It’s early days for earnings season, but according to FactSet, 79% of companies to have reported so far have beaten expectations.
Brent crude prices have slid below $64 as tensions between the US and Iran cool a little and traders assess the heightened threat of wide-sweeping global tariffs.”
