Donald Trump has ignited yet another geopolitical firestorm by threatening to impose tariffs on European allies unless Denmark agrees to cede Greenland to the United States. True to form, the US President has announced plans to introduce an additional 10% levy in early February, rising to 25% by June, targeting eight European nations that have deployed military personnel to Greenland. These include Germany, the United Kingdom, France, the Netherlands, and the Nordic countries (Denmark, Norway, Sweden, and Finland). The European Union has pledged to retaliate with what it has described as a dangerous form of economic blackmail. A countermeasure is reportedly being prepared that could see €93 billion worth of American imports hit with a surcharge. Interestingly, the EU may find indirect support from Canada, which is said to be considering its own military deployment to Greenland for joint NATO exercises.

This unprecedented situation - an erstwhile ally turned territorial predator - has ratcheted up geopolitical tension, albeit without causing immediate turmoil in the financial markets. Investors have become increasingly desensitised to the "Trump style". While his manoeuvres continue to be viewed as risky, their actual market impact tends to be less disruptive than initially feared. Even so, the Greenland case represents an escalation in the transatlantic standoff, the repercussions of which could inflict lasting damage on an already fragile relationship. It also indirectly undermines Ukraine's position in its ongoing confrontation with Russia.

The World Economic Forum in Davos, taking place from 19 to 23 January, promises to be explosive. Donald Trump is scheduled to arrive in Switzerland on Wednesday with an expanded delegation. The WEF, which had lost much of its lustre in recent years, may well become the battleground for competing visions of the Western order.

While geopolitics has not had a lasting negative impact on equity markets in recent months, the weekend's developments pushed forward-looking indicators deep into the red on both sides of the Atlantic. Monday's public holiday in the United States is likely to add to market volatility. In the days ahead, the latest round of quarterly earnings will struggle to divert investor attention from the worsening transatlantic rift. As the week begins, safe-haven assets are firmly in favour: gold and silver both posted record highs on Sunday.

Key points to start the week:

  • In China, Q4 GDP growth came in at 4.5% year-on-year, in line with expectations. Full-year growth for 2025 stands at 5%, matching official forecasts.

  • The euro has fallen to its lowest level since early December following the escalation in Greenland-related tensions.

  • Rick Rieder, BlackRock's Chief Investment Officer for Fixed Income, is reportedly poised to be named successor to Jerome Powell as Chair of the Federal Reserve, according to Bloomberg. The White House is said to favour retaining Kevin Hassett as head of the National Economic Council, while Kevin Warsh remains the bookmakers' frontrunner.

  • On Wednesday, the US Supreme Court will hear arguments on the constitutionality of the White House's attempt to dismiss Federal Reserve Governor Lisa Cook. The Court is also expected to announce one or more rulings on Tuesday, though it remains unclear whether this will include decisions on Trump's tariff measures.

  • Japanese Prime Minister Sanae Takaichi is scheduled to hold a press conference at 10am Paris time today to address the political situation and possibly call early elections.

  • A high-speed train collision in Spain has resulted in over 20 fatalities.

  • California has ordered Elon Musk's xAI to cease the production of sexual “deepfakes”.

In the macro calendar, following this morning's Chinese GDP release, the main data of the week are due Friday, with January PMI activity indicators from major economies. However, as mentioned, the Davos Forum could well dominate the agenda.

In the corporate calendar, in the US, results are due this week from Netflix, Johnson & Johnson, Intel, and Procter & Gamble. In Europe, Rio Tinto, Experian, Barry Callebaut, and Ericsson are scheduled to report.

US markets will remain closed today in observance of Martin Luther King Jr. Day.

In Asia Pacific, Japan began the week down 0.6%, India by 0.6%, and Australia slipped 0.3%. South Korea remains buoyant, extending its winning streak to a twelfth consecutive session. Chinese indices were mixed following the release of the 2025 GDP data, with modest declines on the mainland and a steeper drop in Hong Kong (-1%). European futures are pointing to a weaker open.

Today's economic highlights:

Today's agenda includes: in China, the House Price Index, Fixed Asset Investment, GDP Growth Rate, Industrial Production, Retail Sales, and FDI will be released; in Canada, the Core Inflation Rate, monthly and yearly Inflation Rate, and the Bank of Canada Business Outlook Survey are expected. See the full calendar here.

  • GBP / USD: US$1.34
  • Gold: US$4,677.86
  • Crude Oil (BRENT): US$63.62
  • United States 10 years: 4.22%
  • BITCOIN: US$92,594

In corporate news:

  • Shell and Mitsubishi are said to be exploring the sale of their respective stakes in a Canadian liquefied natural gas (LNG) project. The move would mark a strategic shift in their North American energy portfolios amid growing scrutiny of long-term returns in the LNG sector.
  • Standard Chartered is reportedly reassessing the future of its retail lending activities in India. The review comes as the bank evaluates strategic options for its presence in one of Asia’s most dynamic—but increasingly competitive—consumer finance markets.
  • BioNTech collaborates with Regeneron to develop mRNA-based cancer therapies.
  • Scandinavian Enviro Systems AB appoints Fredrik Aaben as new CEO.
  • DNB target price lowered to 110 by Carnegie, maintaining buy recommendation.
  • SEB target price reduced to 79kr, hold rating maintained.
  • Immunovia receives regulatory approval for Pancreasure test in California.
  • Kesko's K-Group and K-Citymarket increase market share in Finnish grocery market.
  • DNO reports increased Q4 production volumes in Kurdistan and the North Sea.
  • SEB increases target price for NP3 to 319 SEK, maintaining buy recommendation.
  • Micron acquires Taiwanese chip-making site for $1.8 billion to meet AI-driven memory demand.

See more news from UK listed companies here

Analyst Recommendations:

  • Pennon Group Plc: Deutsche Bank maintains its buy recommendation and raises the target price from GBX 580 to GBX 600.
  • Severn Trent Plc: Deutsche Bank maintains its hold recommendation and reduces the target price from GBX 3000 to GBX 2950.
  • Sse Plc: Deutsche Bank maintains its buy recommendation and raises the target price from GBX 2350 to GBX 2500.
  • Johnson Service Group Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 195 to GBX 205.
  • Genus Plc: Shore Capital maintains its buy recommendation and raises the target price from GBX 3000 to GBX 3200.
  • Greencore Group Plc: RBC Capital maintains its outperform recommendation and raises the target price from GBX 300 to GBX 330.
  • Dunelm Group Plc: RBC Capital maintains its outperform rating and reduces the target price from GBX 1300 to GBX 1200.
  • 3I Group Plc: RBC Capital maintains its sector perform recommendation and reduces the target price from GBX 3625 to GBX 3250.
  • Hsbc Holdings Plc: Barclays maintains its overweight recommendation and raises the target price from GBP 12.30 to GBP 14.
  • Standard Chartered Plc: Barclays maintains its equalweight recommendation and raises the target price from GBP 16 to GBP 19.
  • Vodafone Group Plc: Citi maintains its neutral recommendation and raises the target price from GBP 0.85 to GBP 1.