Volatility spikes after US slaps new tariffs on European economies as Trump pushes for Greenland
Market volatility has spiked after the US slapped fresh tariffs against European countries as the fight over Greenland intensifies.
The markets are set for a volatile start to the trading week as the stand-off between the US and European Union on Greenland devolves into new tariffs.
The Trump administration slaps new tariffs on Europe
US President Donald Trump has slapped 10% tariffs on a number of European countries, threatening to up them to 25% in June, as he tries to strong arm the EU into effectively handing over Greenland. US President Trump’s actions over the weekend have inflamed geopolitical risks while also reintroducing trade uncertainty. Reportedly, US President Donald Trump is like a dog with a bone when it comes to acquiring Greenland, with the primary motive expanding US influence in the arctic and acquiring a landmass that can defend and consolidate US interests against close neighbours Russia and – to a lesser extent – China. Apparently, the military establishment is trying to dissuade, overtly and in more subtle ways, Trump from pursuing Greenland. But it appears he’s dead set, risking the existence of NATO and seizing up the ratification of the EU-US trade deal.
Stocks drop as precious metals surge on fresh geopolitical risks
The response in the markets could be interesting because there’s sometimes the tendency amongst market participants to call Trump’s bluff, betting on a TACO trade. It’s a useful heuristic, especially given some of Trump’s behaviour has proven to be self-limiting because of the negative consequences his actions have on the economy and asset prices. Today’s price action, which could be exaggerated due to thinner trading conditions due to the Martin Luther King Day holiday, will be telling of how the markets perceive Trump’s threats. After a quiet session on Friday and a low volatility start to the year (at least for stocks), volatility looks to be roaring back. Early price action suggests equities may experience some significant downside pressure. Precious metals have surged to record highs as the bull case for the complex only gets stronger. Currency markets are mixed as the impact on European growth collides with the so-called “sell America” trade”.
Gold prices climb to fresh record highs near $US4700
The combination of downside risks to growth from higher tariffs and worsening trade relations between the US and Europe, plus a further erosion in trust in US assets is driving gold – and other precious metals – higher. Gold has broken resistance at previous all-time highs after a text book re-test and bounce off support at $US4550. There’s no clear level of resistance ahead of gold in the near-term but attention will be on a push towards what could be an important psychological level at $US4700.
(Source: Trading View)
(Past performance is not a reliable indicator of future results)