MARKET WRAPS
European stocks fell Tuesday, extending Monday's fall, as Trump reiterated his view that Greenland was key for U.S. and Arctic security.
The president is heading to the World Economic Forum in Davos where investors will likely be looking out for any de-escalation in tensions between the U.S. and Europe. Markets have grown accustomed to a pattern of escalation and de-escalation from the Trump administration.
It is a view echoed by Challenger , which said investors remained particularly sanguine regarding the issue of Greenland's sovereignty. Markets appear to bet that Trump will back down and that other world leaders will step in and do what they can to avoid risks.
That said, European markets may have more reasons to worry in that Trump's willingness to ignore international law, and his unwillingness to assist Ukraine, may be viewed as an opening for Russia's Putin to extend incursions into Europe.
This time around, and with mid-term elections in the U.S. this year, the threat of EU counter-tariffs are more politically potent , the bloc has greater leverage and looks more likely to retaliate, according to Lombard Odier.
Lombard Odier's base case is that Trump's Greenland-related tariffs will not go into effect.
Eurasia Group, however, argued to Bloomberg at Davos that the EU lacks the ability and the unity to hit back at the U.S. over Greenland, as individual member states have differing interests.
Elsewhere, Trump threatened 200% tariffs on French wines and champagnes to push French President Emmanuel Macron to join his peace board for Gaza.
Market Insight
Geopolitical risk premia could rise thanks to Greenland-related tariff threats, Lombard Odier said separately, adding that the magnitude and duration of the rise would likely depend on the risk of escalation in the EU-U.S. trade dispute and a Supreme Court ruling on the imposition of tariffs.
Gold is likely to lead the gains, and if tensions rise, European equities are the most vulnerable, particularly those in healthcare, machinery and luxury goods.
The metals and mining sector will this year be shaped by three critical trends : geopolitical shifts, the energy transition, and cautious investment strategies, Wood Mackenzie said.
"The global trade landscape for critical minerals will be defined by two significant events: China's 15th Five-Year Plan in the first half of the year and the U.S. mid-term elections in the second half."
U.S. Markets:
Futures pointed to a lower open as the country emerges from Monday's federal holiday and assesses Trump's tariff threats on European countries.
Forex:
Sterling rose to a one-week high against the dollar but fell against the euro, after U.K. jobs data showed the unemployment rate stayed steady.
The dollar fell against a basket of currencies on concerns relating to Greenland. It could stay under pressure in the near term if tensions encourage investors to increase protections against the risk of the currency falling, Barclays said.
Bonds:
Politics was set to keep dominating bond markets with markets tuned toward Trump's special address on Wednesday, Commerzbank said.
Yields on eurozone government bonds rose in early trade, tracking Treasury yields due to uncertainties around the U.S.'s intention to buy Greenland.
"While the Greenland crisis will continue to play this week, it's something else that catches most attention this morning: a violent sell-off at the long end of the JGB curve," KBC said.
Yields on U.K. government bonds climbed, tracking their developed-market peers, as fiscal concerns in Japan lead to a broader selloff in bonds and as disputes between the U.S. and Europe over Greenland also hurt market sentiment.
"The large selloff in Japanese government bonds is dragging global bond markets lower on the back of pre-election fiscal giveaways," ING said.
The 10-year Treasury yield jumped past 4.25% on renewed tariff uncertainty and growing talk that Europeans could "weaponize" their U.S. assets to retaliate against Trump's aggressive policies toward Greenland, Swissquote said.
"If the dispute over Greenland continues to escalate, it is quite possible that EU investors will sell off U.S. government bonds," BlueBay said, adding the dispute could put pressure on global interest rates.
European economies reducing their holdings of U.S. assets is a risk and adds to concerns that Treasurys are "no longer viewed to be as safe an asset as it once was. Instead, demand for safety is directed into precious metals," according to DBS.
DZ Bank said it expects the 10-year Treasury yield to rise to 4.50% over the next three months with an imminent decision by the U.S. Supreme Court likely to play a contributory role.
Spain was expected to go ahead with the syndicated launch of a new 10-year government bond on Tuesday.
Energy:
Oil prices edged lower despite a weaker dollar and robust economic growth in China, with focus on renewed trade tensions across the Atlantic.
Metals:
Gold prices soared past the $4,700 mark for the first time on a weaker dollar and as fears of renewed trade tensions sparked a rush to safe-haven assets.
"Investors are favoring gold and silver over currencies and government bonds amid rising U.S. debt levels and heightened policy unpredictability," ING said.
EMEA HEADLINES
U.K. Unemployment Remains Near Pandemic-Era Highs
U.K. unemployment was unchanged in the three months through November, remaining close to pandemic-era highs and adding to concerns about the economy's health.
The headline rate of unemployment was 5.1% in September through November, unchanged compared with the three months through October, the U.K.'s Office for National Statistics said Tuesday. This was higher than a consensus of economists polled by The Wall Street Journal, which expected 5.0%.
GSK to Acquire RAPT for $2.2 Billion to Bolster Food Allergy Treatments
Drugmaker GSK said it agreed to acquire Californian biopharmaceutical company RAPT Therapeutics for an estimated equity value of around $2.2 billion, a move that will bolster its respiratory, immunology and inflammation portfolio.
GSK said Tuesday that it made a deal to pay RAPT shareholders $58 per share, with $1.9 billion upfront investment in cash. It is expected to close in the first quarter of 2026 with an estimated aggregate equity value of $2.2 billion.
TotalEnergies' Production Increase to Soften Hit of Weaker Prices
TotalEnergies said higher oil-and-gas production will help soften the financial hit from weaker prices.
The French energy major said Tuesday that fourth-quarter oil-and-gas production grew nearly 5% on the same period a year prior when it produced 2.43 million barrels of oil equivalent a day. Production for the whole of 2025 increased close to 4% compared with its guidance of a more than 3% increase, it said.
China's CTG Duty Free to Buy LVMH's DFS Greater China Stores
Shares of China Tourism Group Duty Free rose after the company said it plans to acquire LVMH's DFS travel retail business in Hong Kong and Macau.
The stock rose 5.7% to 92.40 Hong Kong dollars, equivalent to $11.85, early Tuesday, while the Hang Seng Index fell 0.2%.
GLOBAL NEWS
U.S. Economy Can Grow 4%-5% in 2026, Says Bessent. But Voters Have 'Inflation PTSD.'
President Donald Trump is preparing to make a big speech on Americans' affordability concerns at Davos likely Wednesday. Treasury Secretary Scott Bessent kicked things off by blaming the Biden administration for price inflation and backing the prospects for economic growth this year.
"I believe the American people still have inflation PTSD from the biggest inflation in 49 years, and Americans are right to be upset," Bessent said Tuesday in a press conference at the World Economic Forum's annual meeting in Davos-Klosters, Switzerland.
Chinese Policymakers Look Focused on Domestic Demand to Lift Economy
Policymakers in Beijing are planning to boost Chinese domestic demand as part of their battle against entrenched deflationary pressures and plunging investment.
Senior state planners are formulating a five-year plan to lift domestic demand, acknowledging that the world's second-largest economy currently faces an imbalance between "strong supply and weak demand," according to comments from the National Development and Reform Commission to reporters on Tuesday.
Japan's Long-Term Bond Yields Surge as Looming Election Triggers Fiscal Worries
Japan's long-term government bond yields surged to multi-year highs Tuesday, spurred by fears that an upcoming election could lead to a consumption-tax rate cut that might worsen the country's public finances.
A key focus of the campaigning will be a potential cut to Japan's consumption tax, as both ruling and opposition parties seek to win over voters with measures to alleviate the burden of rising living costs.
Iranian Protester Tells of an Uprising Violently Suppressed
DUBAI-The Iranian businessman was chanting antigovernment slogans along with hundreds of other protesters on the streets of northern Tehran on Jan. 8 when police opened fire. A man a few feet away crumpled to the ground, bleeding profusely.
The 38-year-old entrepreneur said he bent to help the wounded man, but fled as more bullets slammed into the retreating crowd at a packed intersection bordered by a park and a shopping mall.
Europe Contends With a Big New Threat: the U.S.
President Trump's demands that Denmark hand over Greenland to the U.S. or risk a trade war and possible military action is confronting Europe with the unthinkable: Its major ally for more than 70 years has turned into one of its most urgent threats.
The collapse of trust in the U.S. over the past year among the European public and its leaders is forcing the continent to re-examine its reliance-from security to trade-on America under an unpredictable Trump administration that has expressed an antipathy toward Europe and is now insisting on taking an ally's territory.
Trump Links Greenland Threats to Missing Out on Nobel Prize
BRUSSELS-Denmark dispatched additional troops to Greenland on Monday as President Trump added a new dimension to his pursuit of the Danish island, telling Norway that he no longer needed to think "purely of peace" after not winning the Nobel Peace Prize.
European leaders were already scrambling to talk Trump out of a damaging trans-Atlantic trade war over Greenland, after he launched a salvo of tariff threats in relation to the island over the weekend.
Spanish Prime Minister Promises Answers After Train Collision Kills at Least 39
Spanish Prime Minister Pedro Sánchez promised an investigation after two high-speed trains collided in the country's south, leaving at least 39 people dead and dozens more injured.
"Spanish society is asking what happened, how it happened, and how this tragedy could have occurred," Sanchez said during a visit to the site Monday. "We will get to the truth, we will find the answers."
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
January 20, 2026 04:49 ET (09:49 GMT)
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