The global markets faced pressure on Monday as gold and silver prices touched record highs, while the majority of equity indices fell due to trade war tensions sparked by US President Donald Trump. The investors were worried as Trump announced a possible tariff on several European countries due to a dispute over Greenland.
Tariff threats over Greenland dispute
Trump has further escalated geopolitical tensions this month by reaffirming that the US has plans to take over Greenland. Following the failure of talks to overcome what Trump called “fundamental disagreements” on the Danish autonomous territory, the US president has announced that he will impose tariffs on eight European countries.
Under the announcement, Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland would be subject to a 10 per cent tariff as of February 1, which would increase to 25 per cent as of June 1, unless they agreed to the proposed takeover.
The countries affected made a joint statement saying, "Tariff threats undermine transatlantic relations and risk a dangerous downward spiral."
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Europe weighs retaliation options
This step also threatened the trade agreement reached between the United States and the European Union last year. "I don't believe that this agreement is possible in the current situation," Hindustan Times cited German Foreign Minister Johann Wadephul telling ARD television.
Meanwhile, sources close to French President Emmanuel Macron said that France will call on the European Union to use its “anti-coercion instrument” if the tariffs are imposed. The anti-coercion instrument has never been used before, and it gives the EU the ability to limit the imports of goods and services into its 27-member market.
According to Bloomberg, the member states were discussing retaliatory tariffs on as much as EUR 93 billion of US goods.
Safe havens shine as equities slide
The threat of a trade war between large economies encouraged investors to turn to safe-haven assets. Gold rose to a record high of $4,690.59, and silver to $94.12.
Equity markets in Asia mostly declined, with losses registered in Tokyo, Hong Kong, Shanghai, Sydney, Singapore, and Wellington. Markets in Seoul and Taipei were among the few that showed gains. European and US futures also fell.
The dollar was weaker against the major currencies, with gains seen in the euro, pound, and yen.
As per a report by the Hindustan Times, Charu Chanana, chief investment strategist at Saxo Markets, wrote, "The next signpost is whether this moves from rhetoric to policy, and that is why the concrete dates matter."
"On the European side, the decision path matters as much as the headline, because there is a difference between merely mentioning the anti-coercion instrument as a signal and formally pursuing it as action," Chanana stated further adding, "Even if the immediate tariff threat gets negotiated down, the structural risk is that fragmentation keeps rising, with more politicised trade, more conditional supply chains, and higher policy risk for companies and investors."
The market didn't react much after the release of China's latest economic figures. Official data released showed a 5 per cent expansion for last year, hitting the target, but growth slowed noticeably toward the end of the year.
Even the warnings by Howard Lutnick from the US Commerce Department over possible tariffs on South Korean and Taiwanese chipmakers did little to shake sentiment in Seoul and Taipei.
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Key figures at around 0230 GMT
Tokyo - Nikkei 225: DOWN 1.0 per cent at 53,412.88
Hong Kong - Hang Seng Index: DOWN 0.7 per cent at 26,670.01
Shanghai - Composite: DOWN 0.1 per cent at 4,099.23
Euro/dollar: UP at $1.1628 from $1.1604 on Friday
Pound/dollar: UP at $1.3397 from $1.3382
Dollar/yen: DOWN at 157.54 yen from 158.07 yen
Euro/pound: UP at 86.79 pence from 86.69 pence
West Texas Intermediate: UP 0.1 per cent at $59.52 per barrel
Brent North Sea Crude: FLAT at $64.15 per barrel
New York - Dow: DOWN 0.2 per cent at 49,359.33
London - FTSE 100: FLAT at 10,235.29
