US stock futures pointed to steep declines on Tuesday, following President Trump's renewed trade-war tensions with Europe concerning Greenland. A sell-off in Japanese bonds added pressure across global markets.
Dow Jones Industrial Average futures dropped 1.4%, indicating a fall of over 700 points at the market open. S&P 500 futures sank 1.6%, and Nasdaq 100 futures plunged 1.9%.
On Monday, Trump threatened a 200% import tariff on French wines after President Emmanuel Macron declined an invitation to join a "Board of Peace" with a $1 billion fee. Over the weekend, he said eight NATO countries could face extra 10% duties unless the US secured a deal to purchase the Danish territory.
European Commission leader Ursula von der Leyen stated on Tuesday that the EU's response would be "unflinching, united, and proportional," though she provided no specifics. The EU has discussed $108 billion in retaliatory tariffs and may deploy an "anti-coercion instrument" with potential fallout of around $8 trillion for US assets.
Treasury yields climbed to four-month highs, with the 30-year yield reaching 4.93%. The dollar fell to a two-week low as the "Sell America" trade resurfaced. Gold and silver hit new record highs as investors sought safe havens.
Attention is shifting to the World Economic Forum in Davos, where Trump is reportedly set to hold meetings on the Greenland issue. He is scheduled to deliver a key address on Wednesday.
The Supreme Court may rule this week on the constitutionality of Trump's use of emergency powers to impose broad tariffs. Investors are also preparing for earnings reports, including from Netflix after Tuesday's close, with Intel and Johnson & Johnson due later in the week. Analysts expect S&P 500 earnings growth of 12% to 15% this year, but strategists warn of potential downside if "Sell America" sentiment persists.