Global markets rally as Trump backs away from Greenland confrontation, drops tariff threat and signals coordination with NATO, easing investor fears over trans-Atlantic tensions
Relief lifted global markets on Wednesday after US President Donald Trump signalled a retreat from his hardline stance on Greenland, easing immediate geopolitical fears and calming a recent selloff triggered by rising trans-Atlantic tensions.
Trump withdrew a threat to impose tariffs on a number of nations for their stance on Greenland, saying he had reached the outlines of a deal with NATO on the island’s future.
“Based upon this understanding, I will not be imposing the tariffs that were scheduled to go into effect on February 1st,” Trump wrote on Truth Social after a meeting with NATO Secretary General Mark Rutte in Davos.
US equities led the recovery, with Wall Street benchmarks snapping a two-day losing streak as investors welcomed a shift in tone from confrontation to coordination.
European stocks also pared losses after European leaders signalled greater unity on the Greenland issue.
“Markets aren’t rallying because investors suddenly understand the endgame in Greenland. They’re rallying because uncertainty just got priced out,” Matthew Smart, director of financial planning and portfolio analysis at WWM Investments, told Reuters.
“The signal from Donald Trump coming out of Davos is coordination, not confrontation. Pulling back near-term tariffs while opening a framework with NATO around Greenland shifts this from headline risk to negotiation risk,” he said.
Dollar pressure eases
The rebound also suggested that a brief flight away from dollar-based assets may be losing steam. The US dollar steadied after recent weakness, while Treasury yields edged higher as risk appetite returned.
“Traders have been quick to react to some punchy reversals in markets, cutting back on recently entered bearish risk positioning and long volatility hedges, part covering USD shorts, and running a more balanced exposure in gold and silver,” Chris Weston, head of research at Pepperstone, wrote in a client note.
The US dollar held steady at $1.1688 per euro on Thursday, following a 0.3% rebound in the prior session.
European equities, which bore the brunt of the selloff, staged a partial recovery as immediate fears receded. Still, traders cautioned that the underlying political risks have not disappeared.
Trade tensions linger
Despite the market bounce, transatlantic economic relations remain strained. European lawmakers on Wednesday suspended the approval process of the US-EU trade deal, citing concerns over policy unpredictability and recent diplomatic tensions.
While Trump’s climbdown on Greenland may have eased the most urgent fears, broader trade and political frictions continue to cloud the outlook. Analysts warned that the suspension could resurface volatility if negotiations stall or rhetoric hardens again.
For now, investors appear willing to bet that diplomacy will prevail over escalation. But with geopolitical and trade risks still elevated, market participants say the relief rally may prove fragile if fresh flashpoints emerge.
With inputs from agencies.
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