Markets rattle as Trump revives EU trade war over Greenland

Gold and silver hit record highs Monday as US President Donald Trump’s Greenland ultimatum sparked a global flight to safety, fueling equity sell-offs and a weaker USD. With US markets closed for Martin Luther King Jr. Day, the impact was seen mainly in Europe and Asia.

What moved the market

Investors are pouring into havens as they see a return to the “US-EU trade war,” Fordham Global Foresight’s Tina Fordham told Reuters, after Trump announced 10% tariffs starting February on eight European nations opposing his bid to annex Greenland, to be raised to 25% by June without an agreement. EU officials condemned the move as “blackmail,” with Germany’s finance minister saying Europe’s “limit has been reached,” Bloomberg reports. Europe is planning retaliatory tariffs on EUR 93 bn (USD 108 bn) of US goods, and France may invoke the EU’s Anti-Coercion Instrument to restrict US access to public contracts and banking.

Beyond trade, the rally is being fueled by renewed concerns over US institutional stability. The Trump administration has renewed attacks on the Federal Reserve’s independence, and markets are anxiously awaiting a US Supreme Court argument scheduled for Wednesday regarding Trump’s effort to fire Fed Governor Lisa Cook. Simultaneously, Fed Vice Chair Michelle Bowman signaled that a fragile job market might necessitate future interest rate cuts, Reuters reported separately. Markets are currently pricing in at least two 25 bps rate cuts later this year.

A market in flux

Precious metals are having their moment in the sun: Spot gold jumped 1.7% to USD 4.68k an ounce, gold has now risen over 8% this year following a massive 64% gain last year. Spot silver surged 5% to USD 94.4 (up 32% YTD) while platinum (up 1.5%) and palladium (up 1.1%) also posted gains.

Global equities fell as risk appetite waned, with European futures down 1.1%, Japan’s Nikkei down 1%, and US tech in Frankfurt slipping — Alphabet down 2.4%, Nvidia and Microsoft down 2.2%, according to Reuters. Nasdaq 100 futures also dropped 1.25%. The USD weakened on rising political risk, with the EUR inched up 0.26% to USD 1.1628, while Bitcoin fell nearly 3% to USD 92.6k. On the flipside, European defense stocks surged nearly 15% this month on fears about Greenland — after the US seizure of Venezuela’s Nicolas Maduro.

Looking ahead

Gold and silver rally set to continue: Analysts at Citigroup expect the precious metals rally to extend, forecasting gold to reach USD 5k and silver USD 100 an ounce within three months. JP Morgan strategists highlighted a stronger preference for gold, citing its “cleaner, bullish structural story,” while viewing any silver pullbacks as buying opportunities.

These geopolitical risks could threaten US tech: Kallum Pickering, chief economist at Peel Hunt, cautioned that simultaneous pressure on the Fed and Europe could drive investors away from US assets, creating downside risks for already lofty US tech valuations.

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MARKETS THIS MORNING-

It’s a sea of red for Asia-Pacific markets, which are down in early trading as investors remain jittery over US President Donald Trump’s tariff threats over Greenland, while yields on Japan’s long-dated government bonds are rising. It’s not looking much better over on Wall Street, where futures point to a drop on the Dow Jones, S&P 500, and Nasdaq when markets open later today.

THE CLOSING BELL-

The EGX30 rose 2.5% at yesterday’s close on turnover of EGP 5.9 bn (10.5% above the 90-day average). Regional investors were the sole net sellers. The index is up 7.7% YTD.

In the green: Telecom Egypt (+8.7%), TMG Holding (+7.6%), and Madinet Masr (+4.9%).

In the red: Credit Agricole (-1.7%), Ibnsina Pharma (-0.9%), and E-finance (-0.8%).