US stocks were braced for a sharp sell-off on Tuesday after Donald Trump escalated his push to acquire Greenland.
Wall Street been shut since Trump made the threat on Saturday due to the holiday, but traders have still been able to trade futures — giving an early signal of investor reaction.
Trump threatened new tariffs on eight European countries that oppose the deal. Trading in futures suggest heavy losses when stock markets open at 9.30am in New York.
Dow futures pointed to losses of around 680 points. S&P 500 futures were down about 1.4 percent. Nasdaq futures were off roughly 1.7 percent. Shares fell in Europe where markets open earlier.
It would be the S&P’s worst day in two months. It could wipe billions off the value of US stocks and hammer Americans’ investment accounts, including 401(K)s.
Wall Street’s ‘fear gauge’ surged, with the VIX volatility index jumping 27 percent to above 20 for the first time since November.
‘With the US off yesterday, the tariff threat hadn’t fully hit markets,’ said Deutsche Bank strategist Jim Reid. ‘There’s room for bigger moves.’
Traders also piled back into the so-called ‘Sell America’ trade, as they sold US dollar and government bonds.Â
A stock chart shows Nasdaq futures tumbling, signaling a sharp sell-off when Wall Street reopens
A worried Wall Street trader watches market screens as stocks and futures slide amid renewed trade war fears
The dollar index, which measures its strength against six major currencies, dropped 0.9 percent, and the benchmark 10-year Treasury yield rose to around 4.29 percent, moving higher as investors dumped government debt.
Trump said imports from eight NATO countries would face tariffs starting at 10 percent on February 1. They would rise to 25 percent by June 1. The tariffs would stay until a deal on Greenland is reached.
He later threatened 200 percent tariffs on French wine and champagne. He also criticized the UK over the Chagos Islands.
Europe pushed back. France urged the EU to consider its toughest countermeasure — the Anti-Coercion Instrument, known as the ‘trade bazooka’.
Trump will speak at the World Economic Forum in Davos on Wednesday.