The threat of Greenland tariffs reignited trade tensions, Asian stocks were under pressure, and U.S. debt was sold off. Spot gold topped $4,700 per ounce, continuing to hit new highs

# Source: Wall Street Insights

By Ye Huiwen

Donald Trump’s tariff threats over Greenland have reignited global trade tensions and triggered market risk aversion: the MSCI Asia Pacific Index fell 0.5%, S&P 500 index futures dropped 1%, the yield on the 10-year U.S. Treasury note climbed 3 basis points to 4.26%, and spot gold broke through $4,700 per ounce to hit a new all-time high. Despite the resilience of some regional markets such as South Korea’s stock market, investors are closely monitoring the potential escalation of U.S.-Europe standoff and shifting capital to gold to hedge against policy uncertainty.

U.S. President Donald Trump’s tariff threats over control of Greenland have reignited global trade tensions, leading to a pullback in stock markets and a sell-off in government bonds. Market confidence, previously underpinned by the AI investment boom, is now facing a severe test.

The MSCI Asia Pacific Index declined 0.5%, with 9 out of its 11 sub-sectoral indices in negative territory.

Futures on major U.S. stock indices traded broadly lower when they reopened after the holiday, with S&P 500 index futures down 1% as of 1:08 p.m. Tokyo time.

European equity futures indicated that the downward trend would persist, following the region’s worst single-day performance since mid-November last year.

Risk aversion drove a rise in global bond yields, with U.S. Treasuries leading the global bond sell-off. Amid mounting fiscal pressures, tariff threats and growing doubts about demand for U.S. assets, the yield on the 10-year U.S. Treasury note rose 3 basis points to 4.26%. In Asian markets, the yield on Japan’s 40-year government bonds climbed to 4%, hitting its highest level since its launch in 2007.

In commodities trading, spot gold topped $4,700 per ounce, extending its record high run. Crude oil and spot silver saw little change.

Despite the broad-based decline, Asian markets demonstrated certain resilience. South Korea’s stock market set a record of 13 consecutive days of gains, with the Kospi index—a bellwether for AI investments—performing strongly this year. Derek Tay, investment director at Kamet Capital Partners, noted that Asian markets have largely shrugged off U.S.-Europe tensions, and some Wall Street strategists still believe investors should "buy the dip" when tariff concerns trigger stock market declines. However, he also warned that policy-related volatility will persist.

Market focus is currently centered on the further development of the U.S.-Europe standoff and the upcoming World Economic Forum in Davos. Analysts pointed out that as doubts over Federal Reserve independence and uncertainties stemming from tariff policies loom, investors are turning to safe-haven assets such as gold and remaining vigilant about future volatility.

The current market direction depends partly on the EU’s response measures. The EU is considering imposing retaliatory tariffs on $108 billion worth of U.S. goods (equivalent to €93 billion). French President Emmanuel Macron intends to request the activation of the EU’s so-called Anti-Coercion Instrument (ACI). Nevertheless, there are divisions within the EU. German leader Friedrich Merz stated on Monday that Germany is reluctant to take aggressive retaliatory measures due to its high dependence on exports.

After recording their biggest annual gain since 2020, global bond markets have got off to a weak start this year. Investors are demanding higher yields to compensate for persistent inflationary pressures and increased government borrowing. In addition to the upward move in U.S. Treasury yields, Australian and New Zealand bonds also declined, while German bund futures slipped.

Andrew Ticehurst, senior interest rate strategist at Nomura Australia in Sydney, said that the long end of the global sovereign bond curve appears extremely fragile. He pointed out that uncertainties surrounding Fed independence, speculation that Rick Scott could become the next Fed Chair, and the U.S. Supreme Court’s potential ruling on some of Trump’s tariffs have all amplified market concerns about fiscal conditions. Furthermore, demand for Japan’s 20-year government bond auction fell short of the 12-month average, further confirming the weakness in the bond market.

**13:06**

Spot gold topped $4,700 per ounce, continuing to hit a new record high.

**12:50**

New York gold futures broke through $4,700 per ounce to set another all-time high, rising 2.3% intraday.

**12:42**

The Indian rupee fell below 91 against the U.S. dollar, the first time since December 17 last year.

**12:41**

Spot gold once rose to $4,691.57 per ounce, extending its record high.

**12:40**

The yield on Japan’s 20-year government bonds climbed 13.5 basis points to 3.39%.

**12:29**

India’s Nifty IT Index fell 1.3%.

**12:27**

The yield on Japan’s 10-year government bonds rose 8 basis points to 2.350%.

**12:12**

The yield on Japan’s 30-year government bonds increased 10 basis points to 3.71%.

**11:37**

Thailand’s SET Index extended intraday gains to 1%.

**11:36**

Japan auctioned 20-year government bonds, with a bid-to-cover ratio of 3.19, compared with the 12-month average of 3.34.

**11:30**

The Philippine stock market fell 1% intraday.

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