Global shares rebounded yesterday following a selloff in prior session after President Donald Trump toned down his rhetoric in his threats to acquire Greenland while speaking in Davos.
Trump called for immediate negotiations towards a deal to acquire Greenland, but added that he would not use force in his campaign for the northern island. That was a softer tone from the US president, who had said there was “no going back” on his goal to control the island, and had refused to rule out taking it by force. He had also threatened tariffs on Europe, rekindling fears of a global trade war.
On Wall Street, the Dow Jones Industrial Average rose 1 per cent, the S&P 500 gained 1pc and the Nasdaq Composite added 1.1pc. Fears of foreign selling of US assets – the so-called ‘Sell America’ trade that emerged after last year’s ‘Liberation Day’ tariff announcements in April – had gripped markets, causing Wall Street’s main indexes to notch their biggest daily loss since October 10 in the previous session.
“The market bounced when he said we wouldn’t use force,” said Mark Hackett, chief market strategist at Nationwide in Boston. “Following the events of last April, investors are catching on that his negotiating style is very different than past administrations, so uncertainty is a natural outcome.”
MSCI’s All-World index was up 0.61pc after losing ground in the last session, while Europe’s STOXX 600 index, rose 0.17pc. The FTSE index was up 0.31pc.
The VIX index, which measures demand for protection against big swings in the S&P 500, dropped more than 11pc to 17.81, a day after jumping to its highest since November. The index is often used as a proxy for investor nervousness and for many, 20 is the point above which market volatility can suddenly explode.
“It wasn’t so much what president said that mattered as what he didn’t say,” said Brian Jacobsen, chief market strategist at Annex Wealth Management in Wisconsin. “He didn’t reiterate his tariff threat against Europe. He didn’t say the government would use force to get Greenland.”
The European Parliament decided to suspend its work on a trade deal between the 27-member bloc and the US, a parliament member said, following Trump’s repeated requests to take control over Greenland. The European Union will convene an emergency summit in Brussels today to discuss the matter, with the long-standing US-EU alliance at risk.
The global bond market was still reeling from a brutal selloff, having been caught up in a perfect storm of worries over exposure to US assets and a surge in Japanese government borrowing costs.
At the epicentre were long-dated Japanese sovereign bonds, which endured their most aggressive selloff in nearly 25 years on Tuesday, as fears grew over increased government spending under Japanese Prime Minister Sanae Takaichi.
US 30-year Treasury yields neared the 5pc threshold for the first time since September, while German government bond yields also rose sharply. By yesterday, Japanese bond prices rallied as buyers returned, almost entirely reversing the previous day’s rise in yields. A similar dynamic played out across US Treasuries, where 30-year bond yields were steady at 4.905pc. The yield on benchmark US 10-year notes eased to 4.2767pc.
In currency markets, the dollar index, which tracks the US currency’s performance against that of six others, rebounded from earlier losses and was up 0.11pc. The euro pared earlier gains and was down 0.16pc to $1.170825, while the Swiss franc fell, leaving the dollar up 0.42pc at 0.79330 francs. The yen was slightly weaker against the dollar at 158.23 per dollar ahead of a Bank of Japan policy meeting tomorrow. No rate hike is expected this time, though policymakers could signal an increase may be coming as soon as April.
Oil prices fell, as pressure from geopolitical tensions and an expected build-up in US crude inventories was offset by a temporary halt in output at two large fields in Kazakhstan. Brent crude futures was down 0.32pc at $64.71 a barrel. Spot gold was up 1.59pc.
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