US stocks were poised for hefty losses on Tuesday after President Trump reignited trade-war tensions with Europe over Greenland, as a Japan-led global bond sell-off reverberated through markets.
Dow Jones Industrial Average futures (YM=F) tumbled roughly 1.3%, pointing to a drop of nearly 600 points when markets reopen from Monday’s holiday shutdown. S&P 500 futures (ES=F) sank 1.3%, while Nasdaq 100 futures (NQ=F) retreated 1.6% on the heels of a losing week for Wall Street stocks.
Investors are facing a rocky return to trading as the risk of full-on US-EU trade war rattles nerves just as earnings season gets going.
Over the weekend, Trump said eight NATO countries would face extra import duties of 10% unless the US got a deal on a purchase of the Danish territory. On Monday, he doubled down on his pursuit of Greenland even as the EU discussed $108 billion in retaliatory tariffs. It could also deploy an “anti-coercion instrument” with a potential fallout of some $8 trillion for US assets.
Trump then threatened on Monday to put a 200% import tariff on France’s wines after its leader Emmanuel Macron turned down the US president’s invitation to join his “Board of Peace.”
The EU’s response to these threats will be “unflinching, united, and proportional,” European Commission leader Ursula von der Leyen warned on Tuesday, keeping tensions high.
Treasury yields jumped to their highest levels in four months as a sell-off in Japanese bonds added pressure on US debt. In other assets, the dollar (DX-Y.NYB) fell to a two-week low as the “Sell America” trade returned, and haven seekers drove gold (GC=F) and silver (SI=F) to yet more record highs.
Focus is now turning to the World Economic Forum in Davos, where Trump is reportedly set to hold a meeting with other countries over the Greenland crisis. He is scheduled to give his key address on Wednesday.
Looking ahead, the Supreme Court may rule as soon as this week on whether Trump’s use of emergency powers to impose sweeping tariffs is constitutional.
Investors are also bracing for a busy earnings slate, with results from Netflix (NFLX) due after market close on Tuesday. The streaming giant’s stock edged up, bucking the premarket trend after it amended its bid for Warner Bros, Discovery’s (WBD) studio to an all-cash offer on Tuesday.
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