US sharemarkets suffered heavy losses as investor confidence was shaken by an escalation in trade and geopolitical tensions linked to Greenland. President Donald Trump intensified rhetoric over the possible acquisition of the Danish territory, threatening new tariffs on countries opposing the move. The developments triggered a broad sell-off in US assets, with equities falling sharply, Treasury yields rising and the US dollar weakening against major currencies.
The flight from risk was compounded by concerns about US fiscal stability. A major Danish pension fund announced it was exiting US Treasurys, citing worries about America’s debt trajectory, adding to the pressure on bond markets.
Sharp falls across Wall Street
All three major US indices closed deeply in the red. The Dow Jones Industrial Average dropped 1.8 per cent, while the S&P 500 slid just over 2 per cent. The Nasdaq Composite led the decline, falling nearly 2.4 per cent, dragged down by heavy selling in technology stocks. The losses pushed both the S&P 500 and Nasdaq into negative territory for the year.
Market volatility surged, with the VIX index spiking above 20 for the first time since late November, signalling a sharp increase in investor anxiety.
Technology stocks bore the brunt of the sell-off, with information technology the worst-performing sector on the S&P 500. Shares in Nvidia and Tesla each fell more than 4 per cent, weighing heavily on the Nasdaq.
Tariffs and geopolitical tension
The market reaction followed Trump’s announcement that tariffs would be imposed on imports from eight NATO countries unless a deal was reached for the complete purchase of Greenland. The tariffs are set to begin at 10 per cent from 1 February and rise to 25 per cent by June. Further threats included steep tariffs on French wine and champagne, as well as criticism of the United Kingdom over plans to transfer sovereignty of the Chagos Islands to Mauritius.
European leaders have condemned the proposed tariffs and are reportedly considering countermeasures, including the possible use of the European Union’s strongest economic deterrents. The growing rift has raised fears of not only trade disputes but also reduced foreign appetite for US debt.
Safe havens gain, dollar slides
In currency and commodity markets, the US dollar fell sharply, dropping against the euro and pushing the broader dollar index lower. Gold surged to a fresh record above US$4,750 an ounce, while bitcoin slipped below US$90,000. The yield on the US 10-year Treasury note rose to around 4.28 per cent, reflecting ongoing selling in the bond market.
Australian market outlook
Australian shares are set to open lower, tracking the sharp falls on Wall Street. ASX 200 futures are pointing down 50 points, or 0.6 per cent, at 8,738. Investor focus locally will turn to corporate earnings, with results due from Rio Tinto, Beach Energy, Evolution Mining, Lynas Rare Earths, Paladin Energy and Yancoal Australia later today.
