Key TakeawaysGlobal markets sold off on Tuesday, with European stocks extending losses and US equity futures pointing lower.Denmark remained a focal point for investors, given its heightened exposure to potential tariff escalation tied to Greenland.Safe-haven assets like gold and silver reached new record highs.
European stocks fell again on Tuesday, extending losses from Monday, while US equity futures pointed sharply lower. Nasdaq 100 futures were down 2.2%, and S&P 500 futures fell 1.8% while US Treasury yields rose as investors braced for a risk-off open in US markets. Asian stocks also closed lower on Tuesday, after largely resisting the sell-off a day earlier.
US stock and bond markets were closed on Monday in observance of Martin Luther King Jr. Day, meaning Tuesday marked the first full opportunity for American investors to react to an unusually news-heavy weekend and escalating trade tensions between the United States and Europe.
“After a strong start to the New Year the last thing equity markets needed was an act of self-harm by the US administration,” says Michael Field, chief European markets strategist at Morningstar.
After falling 2.3% on Monday, the Morningstar Nordic Index continued lower on Tuesday extending losses to 3.1% for the week. The Morningstar Europe Index was down 2.5% while the Morningstar UK Index had a more muted decline of 1.4% by mid-day.
The stock market moves came after US President Donald Trump said the United States would impose new tariffs on European countries’ imports unless they acquiesce to a change in control of Greenland. Trump said that Denmark, which has sovereignty over Greenland, will face a 10% tariff on goods exported to the US starting Feb. 1. The same 10% levy would apply to Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland, with the rate set to rise to 25% in June if no agreement is reached.
Trump further escalated his rhetoric on Tuesday, threatening 200% tariffs on French wine and champagne after reports that President Emmanuel Macron would not join his proposed Gaza Peace Board. He also lashed out at the UK over plans to hand sovereignty of the Chagos Islands, which host a UK-US military base, to Mauritius, calling the move an “act of great stupidity” and citing it as further justification for acquiring Greenland.
“Markets have taken the prudent approach to the news and retreated, but this is not some well-planned economic land-grab, rather a wild response to Europe’s push-back on Greenland,” says Morningstar’s Field. “As with the Liberation Day tariffs, they are subject to the Supreme Court ruling, and a rule against them will see the Trump administration going back to the drawing board.”
As investors worldwide are assessing how tensions between the United States and Europe may unfold, Henry Cook, Senior Economist at MUFG says that the last year has taught markets not to overreact to Trump’s threats and highlights legal challenges: “As ever with Trump the details are thin on the ground – it’s not clear what legal framework would be used, nor how this would relate to the existing US reciprocal tariffs.”
Danish Stocks Particularly Exposed to Tariff Escalation
If Europe were to face a more isolated tariff shock, Bjarne Breinholt Thomsen, Head of Cross Asset Strategy at Danske Bank, believes substitution effects would naturally come into play.
“According to our economists, a 10-percentage point increase in tariffs could shave up to 0.25 percentage points off European growth. This should be seen as a worst-case scenario, and the likely impact would be materially smaller,” he says, adding that the main vulnerability concerns Danish equities.
According to Thomsen, “for many foreign portfolio managers, Danish stocks are not a core benchmark exposure. With limited upside but potentially asymmetric downside risk if Trump were to escalate toward company-specific measures, restrictions or tariffs, this could weigh disproportionately on Danish equities. This dynamic may lead some foreign investors to stay sidelined rather than add exposure at this stage. In our view, this is the key area to monitor.”
Gold and Silver Extend Gains as US Dollar Weakens
Commodity markets also reflected the broader risk-off mood, with rising concerns over a potential trade war between the United States and the European Union driving demand for safe-haven assets. At the same time, the US dollar continued to weaken, providing additional support to precious metals.
Against that backdrop, gold and silver traded near record highs in morning dealings, at around USD 4,712 and USD 94 per ounce, respectively, as investors sought protection from heightened geopolitical and trade-related uncertainty.
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