Stocks Fall on Greenland Threat, Gold Rises to a Record High
UK and European stocks fell on Monday, and gold and silver soared to new record highs, after President Trump threatened to impose a wave of tariffs on European allies if they block a deal for the US to take control of Greenland.
In a post on his Truth Social media platform, the US president said that he would introduce a 10% levy on imports into the US from the group of eight countries, which includes the UK, France and Germany, rising to 25% in June if no deal if is reached for the complete and total purchase of the Arctic island.
While the announcement was met with condemnation across Europe, a coordinated response is unlikely until EU leaders meet at an emergency summit in Brussels on Thursday. French President Macron has expressed some of the most hawkish views so far, saying that it is time for Europe to deploy its “trade bazooka”, the Anti-Coercion Instrument, which would enable the EU to restrict access for US companies and block applications for lucrative contracts.
The EU could also move ahead with €93 billion worth of retaliatory tariffs that were suspended last year to avert a trade war with its largest trading partner.
Sectors most exposed to a trade war were hit hardest in Monday’s trading session, including luxury goods manufacturers, carmakers and alcoholic beverage companies. Shares in LVMH Moët Hennessy Louis Vuitton and BMW both fell by more than 4% on the day.
LVMH, the world’s largest champagne producer with brands including Moët & Chandon, Veuve Clicquot, and Dom Pérignon, remained in the US president’s crosshairs on Monday evening as he threatened an additional 200% tariff on French wines and champagne in retaliation for Emmanuel Macron declining his invitation to join his Board of Peace initiative aimed at resolving global conflicts.
The dispute over Greenland overshadowed some positive corporate news elsewhere, including Zurich Insurance Group’s £7.7 billion bid to buy Beazley Plc, the Lloyd’s of London insurer. Zurich’s offer of £12.80 per share is a 56% premium above Beazley’s closing share price on Friday.
Beazley’s board has not yet issued a response, but should the deal be accepted, it will create Europe’s largest specialty insurer with combined gross written premiums of around $15 billion a year. Beazley specialises in underwriting complex, high-stakes and niche risks, including cyber, marine, aviation and political.
Prior to the weekend, markets were focused on the start of the quarterly corporate earnings reporting season, led by Wall Street’s biggest investment banks. Shares in Goldman Sachs gained almost 5% on Thursday after it reported profits rose to $4.4 billion, an 18% increase over the same period a year earlier, underpinned by record equities trading and its investment banking division which logged its largest backlog of deals since Covid with M&A activity boosted by looser US regulations.
US Treasury bonds, which typically attract strong demand at times of heightened geopolitical risk, started the week on the back foot, suggesting that the White House administration’s actions have undermined their safe-haven status.
Investors seeking shelter from the geopolitical storm turned to precious metals instead, pushing gold and silver prices to new record highs of $4,670 and $94 an ounce. The two precious metals are off to another torrid start to new year with concerns over US military invention in Iran and Venezuela and the independence of the Federal Reserve also weighing on investors’ minds.
The week ahead will likely be dominated by political events and the world’s media eagerly awaiting Donald Trump’s appearance at the World Economic Forum’s annual meeting in Davos where business and political leaders from around the globe will also be in attendance. Corporate news will be centred on earnings with Johnson & Johnson, Netflix and Procter & Gamble among those due to report fourth quarter results.
(Cover Image Source: Annie Spratt)