Stocks and Bonds Sink Amid Trump-Europe Clash: Markets Wrap
(Bloomberg) — Equities extended their selloff as the standoff between the US and Europe over control of Greenland showed no sign of de-escalation, while heavy selling in Japanese debt rippled through global bond markets.
A 1.6% slump in S&P 500 futures from Friday’s close left the benchmark poised to wipe out year-to-date gains. European stocks fell 1.2%, adding to losses after the Stoxx 600’s worst day in two months. Nasdaq 100 contracts sank 1.9%.
US President Donald Trump’s push to take control of Greenland has injected fresh volatility into markets, reviving fears of a trade confrontation between traditional allies with little sign of compromise. Adding to tensions, Trump overnight threatened to impose steep tariffs on champagne after French President Emmanuel Macron ruled out joining a US-led peace initiative.
“The only hope really is that Republican senators and congressmen put a stop to this,” said Laurent Lamagnere, deputy chief executive officer at AlphaValue in Paris. “Investors have taken advantage of these volatility moments to buy the dip but for myself, I am not comfortable. There is no guarantee it will work this time.”
Longer-term Treasury yields spiked after a meltdown in Japanese bonds, with the move exacerbated by Danish pension fund AkademikerPension’s plan to exit US Treasuries by the end of the month amid concerns over Trump’s policies.
The 30-year US rate rose eight basis points to 4.92%. Earlier, investor unease over Prime Minister Sanae Takaichi’s election pitch to cut taxes on food sent Japan’s 40-year yield to a fresh high.
Precious metals were the main beneficiary of Tuesday’s turmoil as investors sought safety. Gold topped $4,700 an ounce for the first time while silver also hit a fresh record. A gauge of the dollar fell 0.4% and the Swiss franc headed for its biggest two-day advance since April.
The pullback in stocks shows how quickly sentiment has turned in markets heavily skewed toward risk. A survey from Bank of America Corp., conducted before the weekend’s escalations, showed fund managers were the most bullish since July 2021, while protection against a correction had tumbled to an eight-year low.
“The degree of bullishness, of maximum exposition to risk and underexposure to protection and cash is actually weighing on investor sentiment,” said David Kruk, head of trading at La Financiere de l’Echiquier. “That accounts for a large amount of the current profit taking. Most investors are not that overly concerned with the rise of Japanese yields or the geopolitical situation.”
Supreme Court
A series of fresh catalysts could arrive in the coming days, starting with another opportunity on Tuesday for the US Supreme Court to rule on the legality of large parts of Trump’s trade policy. Trump is due to speak in Davos on Wednesday, with investors watching for any sign of an off-ramp in his dispute over Greenland.
Meanwhile, Treasury Secretary Scott Bessent said Trump could announce his pick to run the Federal Reserve as soon as next week.
The Supreme Court decision “could change the situation,” said Nicolas Bickel, group head of investment private banking at Edmond de Rothschild. “It is very difficult to define where the floor is, but we know we have high valuations in nearly every market.”
The continuation of earnings season could give investors something to cheer after a strong start. About 88% of the 33 S&P 500 companies that have reported so far have beaten expectations, according to data compiled by Bloomberg Intelligence, helping underpin the market’s three-year bull run.
Netflix Inc. is expected to post a 25% increase in adjusted earnings for the fourth quarter from a year earlier when it reports after the close on Tuesday. The stock held gains in premarket trading after reaching an amended, all-cash deal to buy Warner Bros. Discovery Inc.’s studio and streaming businesses.
What Bloomberg Strategists Say:
“Tariff risks reared their head at an unfortunate time for a market that was broadly bullish, pointing to more short-term pain. With exposure likely only hedged via crowded commodity markets, investors are probably taking profits, particularly in European equity markets where valuations no longer screen as cheap.”
— Skylar Montgomery Koning, macro strategist. For full analysis, click here.
Corporate News:
The Danish pension fund AkademikerPension is planning to exit US Treasuries by the end of the month, amid concerns that the policies of President Donald Trump have created credit risks too big to ignore. Deutsche Boerse AG is nearing a deal to acquire European fund distribution platform Allfunds Group Plc for about €5.3 billion in cash and stock, according to people familiar with the matter. Quantinuum, a quantum computing company, is working with Morgan Stanley and JPMorgan Chase & Co. on an initial public offering, according to people familiar with the matter. GSK Plc agreed to buy Rapt Therapeutics, a US-based biotech developing treatments for patients with inflammatory and immunologic diseases, in a deal valued at $2.2 billion. Some of the main moves in markets:
Stocks
S&P 500 futures fell 1.6% as of 8:41 a.m. New York time Nasdaq 100 futures fell 1.9% Futures on the Dow Jones Industrial Average fell 1.3% The Stoxx Europe 600 fell 1.2% The MSCI World Index fell 0.1% Currencies
The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.8% to $1.1739 The British pound rose 0.2% to $1.3450 The Japanese yen rose 0.2% to 157.83 per dollar Cryptocurrencies
Bitcoin fell 2.1% to $90,978.64 Ether fell 3.8% to $3,089.08 Bonds
The yield on 10-year Treasuries advanced six basis points to 4.28% Germany’s 10-year yield advanced four basis points to 2.88% Britain’s 10-year yield advanced six basis points to 4.48% Commodities
West Texas Intermediate crude rose 0.9% to $59.97 a barrel Spot gold rose 1.2% to $4,726.04 an ounce This story was produced with the assistance of Bloomberg Automation.
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Neil Campling, Levin Stamm and Sabrina Nelson Garcinuño.
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