European stocks fell in early trading on Tuesday, the dollar entered a second day of declines and US treasury yields hit a four-month high after US president Donald Trump continued his push to take control of Greenland and threatened to reignite a trade war with Europe.
Mr Trump said he no longer thought “purely of Peace” after he did not win the Nobel Peace Prize, and reiterated a threat to increase tariffs on EU members Denmark, Finland, France, Germany, Sweden, and the Netherlands, along with Britain and Norway, until the US is allowed to buy Greenland. EU leaders will discuss options, including tariffs worth €93 billion on US imports, at an emergency summit on Brussels on Thursday.
Stock markets fell, extending Monday’s declines, as the threats from the US reignited a debate over the “Sell America” trade that emerged after Trump’s “Liberation Day” levies announced last April. Europe’s Stoxx 600 was down 1.4 per cent on the day in morning trading, having fallen 1.2 per cent on Monday, while the MSCI World Equity Index was down 0.2 per cent. The FTSE 100 was down 1.4 per cent.
Mr Trump separately threatened to hit French wines and champagne with 200 per cent tariffs, in an apparent effort to cajole French president Emmanuel Macron to join his Board of Peace initiative in Gaza.
Amélie Derambure, senior multi-asset portfolio manager at Amundi in Paris, said that the downward move in markets was “precautionary profit-taking and some risk reduction” but that markets were helped by the macroeconomic backdrop. Recent economic data has pointed to growth and decelerating inflation, and her portfolios remain risk-orientated, she said.
“The situation in Greenland [is] worrying the markets. For the moment it remains relatively contained, there is no panic,” she said.
“I don’t see for the moment anything comparable to Liberation Day or to something very dramatic for markets,” she added.
The dollar index was down 0.6 per cent on the day, in its second day of declines, at 98.485, and the euro was up 0.7 per cent against the dollar at $1.1726, its highest since January 6th.
As investors weighed up the risk of Trump reigniting a trade war with Europe over Greenland, US treasury yields hit their highest since September in early trading.
US markets were closed on Monday for a public holiday, so the moves were a delayed reaction to the developments that began over the weekend. The spread between the US 30-year yield and the 10-year yield, as well as the spread between the two-year and 10-year yield, were both set for their biggest one-day steepening since August 2025.
Elsewhere, Japanese government bond yields hit record highs over concerns that tax cuts will make the government’s finances worse. Japanese prime minister Sanae Takaichi had called a snap general election on Monday.
Oil prices edged higher, with Brent crude futures up 0.2 per cent at $64.01 (€54.54) a barrel and US West Texas Intermediate up 0.5 per cent at $59.72 a barrel, as prices were supported by expectations for global economic growth.
Gold hit a record high, rising above $4,700 an ounce. – Reuters
