US stock futures fell on Monday as markets reacted to President Donald Trump’s threat to impose additional tariffs on eight European countries. This comes after Washington has demanded to purchase Greenland, a move that has fuelled fears of a wider transatlantic trade conflict.
S&P 500 futures slid about 0.7%, while Nasdaq futures fell 1.0% in thin trading, as US equity and bond markets were closed for a holiday. The dollar weakened against traditional safe-haven currencies, slipping against the Japanese yen and the Swiss franc, according to Reuters.
Gold and silver climbed to record highs as investors sought safety, while oil prices eased amid concerns that an escalating trade dispute between the United States and Europe could hurt global growth and demand.
In Europe, market sentiment was also weaker. EUROSTOXX 50 and Germany’s DAX futures were both down 1.1%. In Asia, Japan’s Nikkei index fell 1.0%, while MSCI’s broad index of Asia-Pacific shares outside Japan edged 0.1% lower.
Trump said that he would impose additional 10% import tariffs from February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Britain. He added that the duties would rise to 25% from June 1 if no agreement is reached.
Major European Union countries condemned the tariff threat, describing it as an attempt at economic coercion linked to Greenland.
EU options include retaliatory tariffs on €93 billion ($108 billion) worth of US imports, which were approved last year but suspended for six months in early August, as well as steps under the bloc’s Anti-Coercion Instrument. The latter could target the US services trade or investments.
Analysts at Deutsche Bank said European countries hold around $8 trillion in US bonds and equities, nearly twice as much as the rest of the world combined, and could consider repatriating some of those investments.
“With the US net international investment position at record negative extremes, the mutual interdependence of European-US financial markets has never been higher,” said George Saravelos, the bank’s global head of foreign exchange research.
He warned that using capital flows as leverage would be far more disruptive to markets than tariffs alone.
The standoff is also expected to overshadow discussions at the World Economic Forum in Davos this week, where leaders from around the world will gather, including a large US delegation led by Trump.
In Asia, investors were awaiting Chinese economic data due later on Monday, with growth expected to slow to 4.4% in the December quarter from 4.8% previously, as weak domestic demand offsets strength in exports and manufacturing.
Attention is also on the Bank of Japan’s policy meeting on Friday. While no interest rate hike is expected, policymakers may signal a possible tightening as early as April. Political uncertainty is adding to the backdrop, with Prime Minister Sanae Takaichi expected to dissolve parliament ahead of a February election.
In the United States, delayed data on core inflation and consumer spending for November, due on Thursday, are likely to shape expectations on when the Federal Reserve might cut interest rates again. Strong recent economic data have led markets to push back expectations for easing until at least June.
Corporate earnings remain in focus, with results due this week from companies including Netflix, Johnson & Johnson, General Electric and Intel, alongside major banks.
In currency markets, the euro rose 0.1% to $1.1613 after an early dip, while sterling edged up to $1.3387. The dollar fell 0.2% against the Swiss franc and 0.3% against the yen.
US Treasury cash markets were closed, but 10-year futures edged higher as investors looked for safety. Gold climbed 1.5% to $4,664 an ounce.
Oil prices slipped, with Brent crude down 0.5% at $63.84 a barrel and US crude off 0.4% at $59.18. Traders also remained cautious amid concerns over rising tensions in the Middle East, as a US Navy aircraft carrier group is expected to arrive in the Persian Gulf this week.
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