Global financial markets faced pronounced volatility on Monday, as equities experienced a widespread selloff and precious metals climbed to historic highs in response to escalating trade tensions. The catalyst for this market reaction was U.S. President Donald Trump's reaffirmation of his intention to impose tariffs on European nations opposing U.S. strategic ambitions related to Greenland.
European equities were disproportionately impacted in this risk-averse environment. The Euro STOXX 50, an index comprising the 50 largest companies within the eurozone, declined by approximately 1.3%. This downturn was broadly distributed across major European financial hubs. Germany's DAX index fell nearly 1%, while France's CAC 40 slipped by around 1.5%. By comparison, the United Kingdom's FTSE 100 registered a more modest decrease of about 0.5%.
The selloff was mainly driven by large-cap stocks, which exerted significant downward pressure on their representative benchmarks. Among these, French luxury conglomerate LVMH experienced a substantial drop of close to 4%, signaling notable investor caution within the consumer discretionary sector. Semiconductor equipment manufacturer ASML Holding N.V., listed on NASDAQ, followed with a 3.6% decline. Germany's leading software provider SAP SE saw a 2.4% decrease in share price.
Additional sizable losses were realized by luxury brand Hermès International and Danish healthcare leader Novo Nordisk A/S, both enduring firm declines as the risk-off sentiment permeated various sectors including healthcare and high-end consumer goods.
In the United States, equity index futures mirrored the global risk reduction, descending sharply during European trading hours. It is important to note that the New York Stock Exchange remained closed in observance of Martin Luther King Jr. Day, delaying the reaction in cash trading markets until later.
Meanwhile, the precious metals market underwent a robust rally, underscoring investors' rotation toward traditional safe-haven assets amid geopolitical uncertainties. The SPDR Gold Shares, reflecting the price of gold, surged by approximately 1.6%, setting a new record near $4,670 per ounce. Silver prices outpaced gold, escalating more than 3% to about $93 per ounce, driven by defensive demand and ongoing momentum within the metals sector.
Market commentary highlighted the stark contrast between equity declines and precious metal advances. Nigel Green, CEO of the deVere Group, characterized the situation as a clear signal from investors who now perceive a real possibility that President Trump will act on his Greenland-related tariff threats.
Trump's renewed tariff proposals center on imposing levies on European countries that resist U.S. moves concerning Greenland. The announced plan involves establishing 10% tariffs starting February 1, escalating to 25% by June unless the United States secures control over Greenland territory. Previously, market participants had largely minimized the repercussions of this geopolitical dispute.
In response, European leaders have swiftly expressed their opposition. French President Emmanuel Macron called for the European Union to prepare retaliatory measures, including the reinstatement of tariffs and utilization of the bloc's anti-coercion instruments. EU officials signaled that countermeasures could potentially target U.S. exports valued at up to €93 billion.
This dispute unfolds amid the World Economic Forum in Davos, where global political and corporate leaders convene. Uniquely, President Trump is attending in the capacity of leading a considerable U.S. delegation that includes prominent technology company CEOs. David Morrison, senior market analyst at Trade Nation, remarked that such a setting primes an environment for intensified tensions, especially given the contentious issue of Greenland's ownership emerging so suddenly.
Market participants have begun incorporating the Greenland-related tariff risks into their expectations. Prediction markets on platforms such as Polymarket currently assign a 39% likelihood that tariffs tied to the Greenland situation will commence by February 1. These probabilities vary by country, with Denmark at 36%, Norway at 35%, and Germany at 25%. Looking further ahead, the chance that the U.S. may acquire some portion of Greenland by 2026 is placed around 25%, while the risk of a military invasion remains relatively low, estimated near 11%.
Stock performance metrics showed that ASML Holding NV's shares traded at approximately $1,358.55, experiencing a slight increase of about 2.02% at one point during trading, likely reflecting volatility within the semiconductor sector. Conversely, gold ETF shares proxied by SPDR Gold Shares traded near $422.49, slightly down by 0.20% despite the underlying gold price's rally. Luxury brands such as Hermès International (trading near $2,661.51) and LVMH ($701.80) saw contrasting performances, with LVMH falling notably by over 5%, underscoring the uneven impact on consumer sectors. SAP shares were quoted around $233.59, down approximately 0.95%.
This episode underscores the fragility of global equity markets in the face of renewed geopolitical frictions and exemplifies the traditional flight-to-quality movement into precious metals as investors seek to hedge against trade-related uncertainties. The evolving situation regarding Greenland-related tariffs and the broader U.S.-Europe trade dynamics remains a critical market watchpoint moving forward as these developments attract close scrutiny from financial actors worldwide.