[New York Stock Exchange] US-EU 'Greenland Clash' Triggers Sharp Selloff... Stocks, Bonds, Dollar Hit by 'Sell America'

S&P Posts Largest Drop in Three Months; U.S. Treasuries and Dollar Weaken Together
Trump Threatens Europe with "100% Greenland Tariffs"
EU Considers "Trade Bazooka" Option; Danish Pension Fund Sells U.S. Treasuries
Surging Japanese Bond Yields Ad

On January 20 (local time), all three major U.S. stock indexes on the New York Stock Exchange closed sharply lower due to concerns over a potential "Atlantic trade war" surrounding the Greenland issue. After U.S. President Donald Trump threatened to impose what he called "Greenland tariffs" on Europe, the European side also announced plans for retaliatory measures, and fears that this conflict could escalate into a global trade war rapidly undermined investor sentiment. In addition, a sharp rise in Japanese government bond yields contributed to a renewed "Sell America" phenomenon, with U.S. stocks, bonds, and the dollar all declining simultaneously.

On the 20th (local time), a trader is working on the trading floor of the New York Stock Exchange (NYSE) in the United States. Photo by AFP Yonhap News

On this day, the blue-chip Dow Jones Industrial Average closed at 48,488.65, down 870.68 points (1.76%) from the previous session. The S&P 500 Index, focused on large-cap stocks, fell 143.09 points (2.06%) to 6,796.91, marking its largest single-day drop in three months since October of last year. The tech-heavy Nasdaq Index slid 561.065 points (2.39%) to close at 22,954.322.

The immediate cause of the market turmoil was heightened geopolitical tensions and trade friction over Greenland. On January 17, President Trump announced that he would impose tariffs on imports from eight European countries until a "complete and comprehensive" agreement to purchase Greenland is reached. The targeted countries are Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland, with plans to levy a 10% tariff starting February 1 and increasing to 25% on June 1.

The European Union is also considering retaliatory measures. AkademikerPension, a Danish pension fund with ties to Greenland, announced it would sell all of its $100 million holdings in U.S. Treasury bonds by the end of this month, citing concerns over U.S. federal government debt. While the scale of the sale is not large, the move is being interpreted as a symbolic signal in the market. According to Bloomberg, the EU holds about $10 trillion in U.S. assets, including stocks and Treasury bonds, raising speculation that these assets could be "weaponized." The EU is also weighing the possibility of invoking its Anti-Coercion Instrument (ACI), known as the "trade bazooka," to counter economic threats from third countries targeting member states.

Ray Dalio, founder of Bridgewater Associates and known as the "godfather of hedge funds," warned in a CNBC interview at the World Economic Forum (WEF) in Davos, Switzerland, "On the other side of trade deficits and trade wars are capital and capital wars. Given these conflicts, the possibility of a capital war cannot be ignored. In other words, interest in purchasing U.S. Treasuries may not be what it once was."

Amid concerns over an expanding trade war, both the dollar and U.S. Treasury prices weakened across financial markets. The dollar index, which measures the value of the U.S. dollar against six major currencies, was down 0.8% from the previous session at 98.41.

As U.S. Treasury prices fell, particularly for longer maturities, yields came under upward pressure. The 10-year U.S. Treasury yield, a global benchmark, rose 6 basis points (1bp = 0.01 percentage point) from the previous session to 4.29%. In contrast, the 2-year U.S. Treasury yield, which is sensitive to monetary policy, remained at 3.59%. The rise in Japanese government bond yields also contributed to global interest rate instability, driven by concerns over fiscal soundness amid expansionary fiscal pledges from Japanese politicians ahead of next month's general election.

However, the market is also paying attention to the possibility that the U.S. and EU could seek a diplomatic solution. There are expectations that direct contact between EU leaders and President Trump at the Davos Forum, which runs from January 19 to 23, could provide a breakthrough for easing tensions. President Trump is attending this year's Davos Forum with the largest-ever U.S. delegation.

Officials in the Trump administration are also leaving the door open to easing tensions. U.S. Secretary of Commerce Howard Lutnick warned at the Davos Forum that if Europe retaliates against U.S. trade measures, it could trigger a "tit-for-tat" escalation of tariffs. However, he also referenced last year's precedent of the U.S. and EU reaching an agreement after trade tensions, stating, "In the end, it will be resolved in a reasonable way."

Krishna Guha, Vice Chairman of Evercore ISI, predicted, "Investors expect some form of compromise to emerge, so the seriousness of the situation will ultimately be limited." However, he added, "If these negotiations break down, the impact could be very severe and have lasting aftereffects across multiple sectors, including the dollar."

There are also forecasts of increased market volatility. Brad Long, Chief Investment Officer (CIO) of Wells Spire, commented, "While tariffs and the Greenland issue themselves are not new, the short-term weaponization of tariffs to achieve non-economic or economically related objectives is a new phenomenon," adding, "We are returning to the situation of April 2025, when mutual tariffs were announced and volatility was high due to policy uncertainty and changes from the Trump administration."

By sector, technology stocks were particularly weak. Nvidia plunged 4.32%, Microsoft fell 1.16%, and Apple dropped 3.46%. Alphabet, Google's parent company, and Meta, Facebook's parent company, also declined by 2.48% and 2.6%, respectively.