Stocks Sink as US-Europe Turmoil Fuels Gold Demand: Markets Wrap

(Bloomberg) — Stocks slumped and gold hit a fresh record as trade tensions between the US and Europe flared over President Donald Trump’s push to take control of Greenland.

Futures for the S&P 500 fell nearly 0.9% while those for the Nasdaq 100 sank 1.1%. Europe’s Stoxx 600 headed for its worst day in two months, fueled by losses in luxury and auto shares. Gold topped $4,670 an ounce. The dollar dipped 0.3% as the Swiss franc outperformed. US markets were shut for a public holiday.

Trump’s threat to impose levies on countries opposing his bid to claim authority over Greenland risks reigniting the volatility that rattled markets in the early months of his second term. The selloff deepened after European officials signaled they were unlikely to back down and were considering retaliation.

“The nervousness is palpable,” said Alexandre Baradez, chief market analyst at IG in Paris. “All in all, you have so many issues piling up — from credit cards to the independence of the Fed and tariffs — that I really don’t see the case for stock markets to keep on breaching new records.”

The standoff is happening at a time when risk appetite has been supported by resilient earnings and sustained investment in artificial intelligence. The outlook will hinge in part on the European Union’s response, with the bloc in talks to impose tariffs on €93 billion of US goods.

French President Emmanuel Macron intended to request the activation of the EU’s so-called anti-coercion instrument, Bloomberg reported over the weekend. German leader Friedrich Merz, however, said Monday that Germany’s heavier dependence on exports means it’s less willing to unleash the countermeasure.

“The key element to watch in the coming days is whether the message translates into formal measures or remains purely rhetorical, which would make a clear difference in the market reaction,” said Francisco Simón, European head of strategy at Santander Asset Management.

US 10-year Treasury futures fell, implying a two basis-point increase in the corresponding cash yield. German rates retreated at the short end as traders bet a sustained trade war could open room for interest-rate cuts. Longer-dated yields rose on concerns governments may issue more debt to support growth.

The tensions are also adding to the significance of a pending US Supreme Court ruling on some of Trump’s earlier tariffs, with a decision possible as soon as Tuesday.

Trump’s threats raise the possibility of European governments trimming their holdings of US assets, supporting the euro, according to George Saravelos, Deutsche Bank’s global head of FX research.

Europe is the US’s largest lender, owning $8 trillion of US bonds and equities, almost twice as much as the rest of the world combined. The common currency rose 0.4% on Monday.

“The key thing to watch will be whether the EU decides to activate its anti-coercion instrument,” Saravelos said. “It is a weaponization of capital, rather than trade flows, that would by far be the most disruptive to markets.”

What Bloomberg Strategists Say:

“Speculator positioning over the last few weeks has become net risk-on, leaving the market subject to upset if the latest geo-economic flare-up over Greenland escalates. The market is even less prepared for a risk-off move from this perspective than it was when Trump launched his tariff salvo last year, with the net measure back then significantly more in favor of risk-off instruments.”

— Simon White, macro strategist. For the full analysis, click here.

Some traders expect the swings to be short-lived, seeing the pullback as an opportunity to add exposure to stocks.

“My working assumption is that an ‘off-ramp’ from these threats will soon be found,” said Michael Brown, senior research strategist at Pepperstone. “With the fundamental bull case for risk still a resilient one, and providing that any European retaliation remains largely rhetorical, I would view equity dips as buying opportunities.”

Traders are also watching Japan, where Prime Minister Sanae Takaichi set Feb. 8 for an early election. Takaichi is seeking a mandate for her vision of fiscally responsible expansionary policies to boost growth. Earlier on Monday, the yield on 10-year Japanese debt rose to the highest levels since 1999.

Corporate News:

Zurich Insurance Group AG has made an offer to buy Beazley Plc, valuing the UK-listed cyber insurer at about £7.67 billion ($10.3 billion). De Beers cut its official diamond prices for the first time in more than a year, according to people familiar with the matter, ending its attempts to support the market in the face of slumping demand. Defense firm Czechoslovak Group AS is considering setting a price in an accelerated initial public offering that would value the company at about €25 billion ($29.1 billion), according to people familiar with the matter. Nvidia Corp. supplier Micron Technology Inc. said an ongoing memory chip shortage has accelerated over the past quarter and reiterated that the crunch will last beyond this year due to a surge in demand for high-end semiconductors required for AI infrastructure. Apple Inc. retook the top spot in China after iPhone shipments jumped 28% during the holiday quarter despite a worsening shortage of vital memory chips, according to Counterpoint Research. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.9%, more than any closing loss since Dec. 17, 2025 as of 3:25 p.m. New York time Futures on the Dow Jones Industrial Average fell 0.8%, more than any closing loss since Jan. 7, 2026 The MSCI World Index fell 0.1% Nasdaq 100 futures fell 1.1% The MSCI Emerging Markets Index rose 0.1% to a record high Mexico’s S&P/BMV IPC rose 0.3% Ibovespa Brasil Sao Paulo Stock Exchange Index was little changed Currencies

The Bloomberg Dollar Spot Index fell 0.3%, more than any closing loss since Dec. 23, 2025 The euro surged 0.4%, more than any closing gain since Dec. 22, 2025 The British pound rose 0.3% to $1.3426 The Japanese yen was little changed at 158.15 per dollar The offshore yuan rose 0.2% to the highest in almost three years The Mexican peso strengthened 0.3% The Brazilian real gained 0.1% Cryptocurrencies

Bitcoin slipped 2.3% Ether slipped 3.7% Bonds

The yield on 10-year Treasuries was little changed at 4.22% Germany’s 10-year yield was little changed at 2.84% Britain’s 10-year yield advanced one basis point to 4.41% Commodities

West Texas Intermediate crude was little changed Spot gold rose 1.6% to the highest on record This story was produced with the assistance of Bloomberg Automation.

–With assistance from Macarena Muñoz, Julien Ponthus, Sagarika Jaisinghani, James Hirai and Sebastian Boyd.

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