Market Report.
🇪🇺 France pushed for the European Union to use the “Anti-Coercion Instrument” (ACI) at an emergency meeting in Brussels on Sunday. The ACI is designed to deter “economic coercion” that pushes for policy changes affecting trade and investment in the EU. Retaliation can involve measures in trade, financial markets, intellectual property rights, and public procurement.
⚠️ The ACI is seen as a “nuclear option” against Trump’s tariffs, which have caused concern across the EU. Not all EU members are eager to deploy the ACI, with Germany being more reticent due to its economy’s dependence on exports.
🏭 Sectors most exposed to Trump’s tariffs include the auto industry (e.g. BMW, Stellantis), luxury goods (e.g. LVMH, Kering), and pharmaceuticals (e.g. Novo Nordisk, Roche).
💰 According to Deutsche Bank analysts, european countries have a major advantage as they consider counter-measures against Trump’s proposed tariffs on 8 European nations over the Greenland issue – their huge holdings of U.S. assets. European countries hold around $8 trillion in U.S. bonds and equities, almost double the rest of the world combined. This makes the U.S. heavily reliant on Europe to “pay its bills” via large external deficits.
💶 The impact on the euro may not be as negative as feared, as the potential “weaponization of capital” by the EU could be more disruptive to U.S. markets than just trade flows.
📈 In fact, this first escalation of tensions has led to a rise in the 10-year bond premium of more than 2.5% since Friday, with the bond yielding around 4.27%.
🏛️ But the threats on Greenland are not only provoking reactions in Europe, also among US congressmen there are important movements. The Guardian reports that senior Republicans have warned Donald Trump that any attempt to invade Greenland would immediately end his presidency, underscoring the scale of political backlash such a move would trigger within his own party.
🛡️ But it is also true that Poland and the Baltic states are unlikely to risk losing U.S. security guarantees and protection against Russia by escalating the dispute over Greenland. Their security concerns will likely take precedence.
🤝 Similarly, countries like Italy that would be economically vulnerable to a U.S.-EU trade war are also unlikely to fully back a confrontational approach. Europe will have to show pragmatism rather than principle.
🕊️ Trump has proposed a “Gaza Board of Peace” to address the Israeli-Palestinian conflict, but the plan is facing significant backlash. French President Emmanuel Macron has reportedly rejected an invitation to join the board, according to Bloomberg reports.
🍷 When asked whether he would respond to French President Emmanuel Macron’s decision not to join a proposed peace board, former President Donald Trump dismissed Macron’s role and joked that “nobody wants him,” adding that he would impose a punitive “200% tariff” on French wines to compel compliance
💵 The Trump administration is asking countries that want a permanent spot on the board to contribute at least $1 billion. Critics are worried that Trump is trying to build an alternative or rival to the United Nations, which he has long criticized.
🌍 Trump has confirmed that he has invited Russian President Vladimir Putin to join the board.
📜 Macron believes the charter goes beyond just addressing the situation in Gaza and raises significant concerns, particularly over respect for the principles and institutional framework of the United Nations, which France considers non-negotiable.
🌐 The arrival of Donald Trump in the White House for the second time is causing a change in the world’s epicenter, the US, don’t believe me? The proof of this is to see how the profiles of characters who come to the WEF this year change. The absence of globalist representatives and the greater presence of neo-conservative representatives.
🏔️ U.S. President Donald Trump will attend in person to the 2026 World Economic Forum in Davos, bringing the largest U.S. delegation yet. This includes officials like Secretary of State Marco Rubio and Treasury Secretary Scott Bessent.
🇺🇸 U.S. Treasury Secretary Scott Bessent wants to deliver one key message at the World Economic Forum in Davos: “America First does not mean America alone.”
🚫 However, some major global leaders are not on the attendance list, including Chinese President Xi Jinping, Indian Prime Minister Narendra Modi, and Brazilian President Lula da Silva. The Danish government has decided not to send representatives, as tensions escalate over Trump’s push to acquire Greenland.
🌎 Some controversial figures like Argentina’s Javier Milei and Indonesia’s Prabowo Subianto are on the attendance list, highlighting the diversity of perspectives present.
📰 Meanwhile, there is another order of news that is also happening in the background to the international show.
⚖️ Federal Reserve Chairman Jerome Powell plans to personally attend the Supreme Court oral arguments on Wednesday in the case challenging President Trump’s attempt to fire Fed Governor Lisa Cook. Trump claimed he was firing Cook from the Fed Board due to allegations of mortgage fraud, but Cook denies any wrongdoing and has not been charged with a crime.
🏦 Powell’s planned attendance at the Supreme Court arguments is unusual, underscoring the Fed’s view that the question of a president’s power to fire Fed governors has potentially existential consequences for the central bank’s independence.
🚨 This comes as Powell himself is under criminal investigation by the U.S. Attorney’s Office over a renovation project at the Fed’s headquarters and his testimony to Congress about it.
🗳️ New elections in Japan could influence the agenda of its central bank.
🏯 The Bank of Japan (BOJ) is expected to keep its policy rate steady at 0.75% at its upcoming policy meeting on January 23, but it is likely to signal its readiness to hike rates further. The BOJ is set to revise up its growth forecast for fiscal year 2026, reflecting the boost from the government’s stimulus package and the fading impact of U.S. tariffs.
📊 The central bank may also slightly revise up its inflation forecast for fiscal 2026, as the effect of government steps to curb utility bills is offset by rising goods prices and steady wage gains.
🧩 However, BOJ Governor Kazuo Ueda is expected to offer few clues on the timing of future rate hikes, as the decision is complicated by rising bond yields and the announcement of a snap election by Prime Minister Sanae Takaichi.
💴 Takaichi’s reflationist policies, including proposals to cut the consumption tax and end “excessively tight fiscal policy,” could put pressure on the BOJ to maintain low rates, even as the yen’s depreciation and inflationary pressures may prompt the central bank to hike rates sooner.
🏠 According to Reuters, China’s new home prices extended their decline in December, falling 0.4% month-on-month and 2.7% year-on-year, marking the fastest annual decline in five months.
📉 The continued weakness in the property sector is expected to remain a major drag on China’s economic growth over the next 2-3 years.
🏗️ A real estate recovery could help lift household consumption and ease broader imbalances in the economy, but the divergent trend in China’s property market is expected to continue. Property investment and home sales declined significantly in 2025, highlighting the persistent downturn in the sector despite government pledges to stabilize it.
🧱 The property sector remains a pillar of the Chinese economy and has significant room for transformation, calling for “strong policy actions” to stabilize expectations.
🇫🇷 The French government, led by Prime Minister Sebastien Lecornu, has decided to use special constitutional powers to force through the 2026 budget without a full parliamentary vote. To win the Socialists’ support and avoid a no-confidence vote, the government has made some concessions, such as not cutting a tax rebate on pensions and increasing a monthly income supplement for low-income workers.
⚡ However, Lecornu has now said he will invoke Article 49.3 of the Constitution to bypass a parliamentary vote, breaking an earlier promise. This will likely still lead to a no-confidence vote.
📊 Neither the Socialists nor the conservative Les Republicains party want to risk snap elections, with the Le Pen currently ahead in popularity polls. But the hard-left France Unbowed party has vowed to file a no-confidence motion.
Market View.
📉 Market turmoil continues as tensions escalate between the United States and Europe over Greenland. E‑mini S&P 500 futures have extended their decline, breaking below the 6,900‑point support level and falling to around 6,880 points. Nasdaq 100 futures have also lost ground, slipping below 25,300 and currently trading near 25,268 points.
💵 The US Dollar Index (DXY) has also suffered sharp losses in recent hours, breaking below the 99‑point support and dropping to around 98.80. This move has triggered a strong rebound in major currency pairs, with EUR/USD surging towards the 1.17 area.
📈 At the same time, US 10‑year Treasury yields have spiked sharply, reaching around 4.28%, representing an increase of more than 2.6% over the past three sessions.
🇪🇺 In Europe, DAX 40 futures are struggling to hold above the 25,000‑point level and are currently trading around 24,925 points. Euro Stoxx 50 futures have lost the 6,000‑point level and have fallen to approximately 5,900 points.
🛢️ Crude oil also appears to be feeling the impact of the global situation. Amid concerns over a potential slowdown in trade between Europe and the United States, Brent crude is trading around $63.60 per barrel.
🥇 Meanwhile, gold futures have posted yet another all‑time high, surging to around $4,725 per ounce.
₿ Unfortunately, Bitcoin has once again lost the $92,000 support level, which had taken considerable effort to reclaim, and has fallen back to around $90,895.
