EMEA Morning Briefing : Trump Heads to Davos as Greenland Tensions Simmer

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Opening Call:

European stock futures traded slightly lower early Wednesday. Asian stock benchmarks were mostly down; the dollar fell; Treasury yields were down; while oil futures were mixed and gold strengthened.

Equities:

European stock futures were down as trade turmoil returned to Wall Street, after President Trump stepped up his campaign to take over Greenland and threatened new restrictions on trade with Europe should he not get his way.

The prospect of conflict over Greenland reignited fears that tit-for-tat levies could hurt corporate profits and slow economies around the world. The Nasdaq composite slid 2.4% in its worst day since October, while the S&P 500 fell into the red for 2026, interrupting a long calm in markets and raising the specter of the so-called "Sell America" trade.

"This brings back the fluidity of tariffs, and it's not just for economic reasons," said Brad Long, chief investment officer at Wealthspire. "That throws all the cards back on the table."

Forex:

Trump's threats of tariffs on European countries may wind up being a bigger problem for the euro than the dollar.

"Greenland is a much bigger problem for Europe and the euro in an extreme scenario of a meltdown in the E.U.-U.S. relationship," said currency analysts at Barclays.

If the relationship between the U.S. and Europe breaks down, the U.S. dollar will remain the world's reserve currency, "but with a lot more volatility," said Anthony Saglimbene, chief market strategist at Ameriprise Financial. "If trade gets tougher, I think it's going to hurt European companies more than it's going to hurt U.S. companies," with the euro likely weakening more than the greenback, he said.

Bonds:

Treasury yields broke a six-week trading range, thwarting the bond market's traditional role as a safe haven in times of stock market volatility.

The jump in the 10-year Treasury yield to 4.3% overnight broke a range that was steadfastly between 4.1% and 4.2%.

"There's no safe place to hide. Bonds and equities are both getting hit, " said Jim Caron at Morgan Stanley Investment Management.

Energy:

Oil was mixed amid risk-off mood spurred by U.S.-Europe tensions over Greenland. However, any declines may be limited by potential supply disruptions, analysts said.

"Kazakhstan's largest oil producer recently halted production at the Tengiz and Korolev fields as precautionary measures after two fires at power generators," ANZ Research analysts said. "The Tengiz field is expected to remain shut for at least 10 days," the analysts added.

Metals:

Gold rose, with U.S.-Europe tensions simmering as Trump heads to the World Economic Forum in Davos, Switzerland. Trump is expected to give a speech there on Wednesday.

Trump said he agreed to a meeting at the forum following what he described as a "very good" call with North Atlantic Treaty Organization Secretary General Mark Rutte.

The main theme seems to have been risk-off, Commerzbank Research analysts said, citing Trump's tariff threats against Europe.

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Copper rose, recouping the previous day's losses. Gains in the metal's prices could be fueled by macro and U.S. dollar dynamics, with a lower dollar likely to spark broad base-metal buying, according to a recent ING note.

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Iron ore fell in early Asian trading. Prices are being driven more by macro expectations than by market fundamentals, Nanhua Futures analysts said.

Prices have limited room for further upside as rising inventories and slow output recovery don't justify the elevated valuations, they said. But downside is also capped as steel mills have robust restocking needs, meaning price pullbacks are likely to prompt replenishment demand.

TODAY'S TOP HEADLINES

Greenland Clash Risks Undermining America's Place in World Economic Order

Escalating tensions over Greenland are supercharging a dynamic that was already under way: a shift in the world economic order that had put the U.S. at the center of the global economy.

For investors the world over, America has long been a beacon of safety when uncertainty reigns, a nation whose deep and liquid financial markets are the premier destination for capital and home of a currency that is the lingua franca of international transactions. That is changing.

Treasury Secretary Scott Bessent Turns Up the Heat on Fed's Jerome Powell

Treasury Secretary Scott Bessent, who for the past year has been seen as the Trump administration's moderating voice on Jerome Powell, delivered his most pointed public critique of the Federal Reserve chair to date.

During a CNBC interview on Tuesday, Bessent said it was inappropriate for Powell to attend Wednesday's oral arguments in the case of Fed governor Lisa Cook, arguing that his attendance would be an attempt to "put his thumb on the scale" for the institution.

Gold and silver hit fresh records as Trump's attack on 'the existing world order' stokes new surge in metal markets

Gold and silver rose to fresh record highs Tuesday, with investors finding few other places to safeguard their portfolios after President Donald Trump threatened new tariffs on European allies.

Trump's threat, tied to his efforts to acquire Greenland, "shook the foundations" of the U.S. alliance with the European Union and NATO, said Jim Wyckoff, senior analyst at Kitco.com.

Danish Pension Fund Is Exiting Treasuries-but Will Stick With U.S. Assets

AkademikerPension, a Denmark-based pension fund, said it is going to sell all its holdings of U.S. Treasuries, but it isn't abandoning U.S. fixed-income assets entirely.

The move comes after President Donald Trump threatened further tariffs on European allies if a deal on Greenland isn't reached. In an email to Barron's, AkademikerPension's chief investment officer, Anders Schelde said that the decision to sell Treasuries stems from the U.S. government's poor finances and "thus not directly related to the ongoing rift between the US and Europe, but of course that didn't make it more difficult to take the decision."

Trump's Threats to Allies Stir Worry That U.S. Has Lost Its Way

DAVOS, Switzerland-President Trump is showing up for an annual gathering of the global elite here in the Swiss Alps, swinging a wrecking ball at the international order.

Trump insists he will take possession of Greenland from North Atlantic Treaty Organization ally Denmark-by force if he has to. Ahead of his trip, he posted an image portraying him lecturing European leaders in front of a map in which Greenland, Canada and Venezuela are emblazoned with the Stars and Stripes.

Netflix Revenue and Profit Rise as Subscriptions Top 325 Million

Netflix on Tuesday reported strong fourth-quarter results, shortly after sweetening its $72 billion deal for Warner Bros. Discovery's studios and the HBO Max streaming service.

Netflix increased revenue and profit from the prior-year quarter and beat analyst forecasts, with popular series such as the final season of "Stranger Things" boosting viewership. The company attributed its growth to increases in subscribers, prices and advertising revenue.

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Expected Major Events for Wednesday

07:00/UK: Dec CPI

07:00/UK: Dec UK producer prices

09:00/FRA: Jan IEA Oil Market Report

09:00/ICE: Dec Harmonized CPI

09:00/ICE: Dec Labour Force Survey

09:30/UK: Nov UK House Price Index

11:00/UK: Jan CBI Industrial Trends Survey

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

01-21-26 0018ET