The US president has linked his bid to seize control of Greenland with his frustration over not securing the Nobel Peace Prize, ahead of his trip to the Davos Forum—a summit where his meetings with European leaders, who have vowed to retaliate if Washington raises tariffs, will be closely watched.
The standoff between Washington and Brussels "could result in the invalidation of the US-EU trade deal reached last July (but still pending approval in the European Parliament), while Macron (France) threatens the US with activating the anti-coercion mechanism, his main retaliatory tool, and reinstating tariffs on 93,000 mln eur worth of American products previously approved but suspended following the trade agreement," analysts at Renta 4 noted.
These analysts highlight that, after being closed on Monday for Presidents' Day, Wall Street will on Tuesday price in the heightened commercial and geopolitical tensions. They also point to the possible Supreme Court decision on Trump's reciprocal tariffs, "with a high likelihood of being invalidated but potentially replaced by others."
Amid the renewed escalation of tensions and tariff uncertainty, Citi downgraded its recommendation for European equities from "overweight" to "neutral."
On the macroeconomic front, Germany will release the January ZEW survey, with expectations for the economic sentiment sub-index to rise from 45.8 to 50.0.
As of 08:02 GMT on Tuesday, Spain's IBEX 35 benchmark index was down 137.10 points, or 0.78%, at 17,509.00 points, while the FTSE Eurofirst 300 index of leading European stocks slipped 0.63%.
In the banking sector, Santander lost 0.82%, BBVA fell 1.00%, Caixabank dropped 0.79%, Sabadell was down 1.53%, Bankinter shed 1.22%, and Unicaja Banco declined 1.06%.
Among major non-financial stocks, Telefónica gained 0.48%, Inditex slipped 0.57%, Iberdrola lost 0.54%, Cellnex dropped 0.96%, and oil company Repsol fell 0.60%.
(Reporting by Tomás Cobos, editing by Jorge Ollero Castela)
