Calmer tone after Greenland tariff U-turn sets stage for a busy U.S. data day
Greenland tariff U-turn lifts risk appetite. U.S. President Donald Trump stepped back from threats to impose tariffs related to Greenland, removing a near-term source of transatlantic trade risk and sparking a rally in global equities. The move eased market anxiety this week, helping stocks recover some losses and pushing the VIX lower, while gold pulled back from record highs. In the short term traders will watch U.S. inflation and growth data and corporate earnings for confirmation. Over the longer term markets face the prospect of repeated policy surprises and stretched investor positioning that could amplify future shocks across the United States, Europe, Asia and emerging markets.
Risk tone brightens after political reversal
Global equities rallied as traders digested the sudden reversal on Greenland that removed the immediate threat of tariffs on Europe. The S&P 500 rose 1.16% in the previous session and the pan-European STOXX index climbed more than 1% in early trading. The VIX fear gauge eased after peaking earlier in the week.
Safe-haven gold slipped from an all-time intraday high of $4,887.82 per ounce as investors rotated back toward risk assets. Treasury yields retreated on the day, helped by a well-received 20-year bond auction and softer risk pricing. Those moves suggest markets were relieved by the diplomatic de-escalation, though diplomats in Europe cautioned that the episode is not fully resolved and that sovereignty and self-determination questions remain.
Policy signals remain central
Beyond the tariff drama, developments on monetary and judicial fronts are adding weight to market assessments. U.S. Supreme Court questioning in the case over the attempted removal of Federal Reserve Governor Lisa Cook underscored the importance of preserving central bank independence. One justice warned against a low bar for presidential dismissal that could weaken Fed autonomy.
Investors expect the Fed to hold rates steady at its January meeting and are watching November personal consumption expenditures inflation, the Fed’s preferred gauge, for clues on the policy path. The PCE release will test how much the recent geopolitical noise altered inflation expectations and safe-haven flows.
Corporate calendar and sector movers
Attention turns to corporate earnings for fresh momentum. Intel (Nasdaq:INTC) vaulted 12% ahead of its quarterly report, a move that reflected investor optimism about the data center cycle and government support last year. The stock has climbed about 152% over the past 12 months, a dramatic rebound that helped lift semiconductor groups and Asian technology markets.
Other scheduled corporate reports include Abbott Laboratories (NYSE:ABT), Freeport-McMoRan (NYSE:FCX), General Electric (NYSE:GE) and Procter & Gamble (NYSE:PG). Those results will matter for sector rotation narratives because they span healthcare, materials, industrials and consumer staples. Earnings will also show how much revenue and margin pressure from tariffs and supply constraints have influenced company performance.
Geopolitics, commodities and positioning
Despite the de-escalation, geopolitical frictions remain relevant. Discussions about Arctic security and guarding against Russian and Chinese influence were flagged as part of the Greenland outcome. Separately, reports that Russian President Vladimir Putin would discuss a possible Ukraine peace plan with U.S. envoys added another diplomatic thread for markets to monitor.
On commodities, U.S. aluminium buyers are reportedly paying a 68% premium because of tariff increases and global supply constraints. That premium exposes corporate consumers to near-term cost pressure unless imports rise. Gold’s recent spike illustrated the speed at which geopolitical stress and safe-haven buying can push prices to extreme levels. Meanwhile, some investors see Asian defence firms as potential beneficiaries from heightened security concerns.
Positioning and the near-term outlook
Bank of America (NYSE:BAC) conducted a global funds survey at the start of the year that showed extreme positioning across markets. The recent Greenland episode provided a reminder that political volatility can unsettle an already crowded trade. Markets may therefore remain sensitive to news flow even after the immediate tariff threat was removed.
In the coming sessions traders will focus on several concrete inputs. The U.S. release of the November PCE price index will offer the clearest signal on inflation pressures that could influence Fed thinking. The U.S. Q3 GDP revision and weekly jobless claims will add color on the growth picture. Treasury supply including 10 year inflation-protected securities and 2-year floating rate notes will also be watched for any technical impact on yields.
Corporate earnings, starting with Intel and including Abbott Laboratories, Freeport-McMoRan, General Electric and Procter & Gamble, will shape whether the equity rally has breadth. Strong results could extend the relief rally, while evidence of margin erosion from tariffs and supply constraints would revive concerns about earnings durability.
What traders should watch next
Markets are trading on a mixture of relief and caution. Policy signals from the Supreme Court and the Fed, incoming U.S. economic data, and a heavy corporate calendar create multiple near-term catalysts. Historical context matters because investors entered the year with concentrated positions and strong bullish sentiment. That increases the chance that fresh information will produce outsized moves in either direction.
For the session ahead, the combination of a removed tariff threat, ongoing earnings reports and key economic data suggests active price discovery. Investors will parse results and statistics for confirmation that the recent risk-on response can be sustained. At the same time markets will watch political developments for further surprises that could alter risk premia across regions from the United States to Europe and Asia.
