(Jan 22): Asian stocks were set to break a three-day losing streak after Wall Street rallied on comments from US President Donald Trump that he had reached a “framework” deal with Nato regarding Greenland.
Equity-index futures for Japan, Hong Kong and Australia all advanced after US shares surged on indications that new tariffs won’t be imposed. The S&P 500 climbed 1.2%, erasing its losses for the year, while an index of Chinese companies listed in the US gained 2.2%. Yields on 10-year Treasuries fell five basis points to 4.24%, and a US$13 billion auction of 20-year bonds met solid demand. The dollar wavered.
Trump said he wouldn’t use force or seek negotiations and would refrain from imposing tariffs on European nations that opposed his bid to take control of Greenland. His comments at the World Economic Forum in Davos helped revive global risk appetite, as investors took them as a sign of easing geopolitical and trade tensions.
“The framework of the Greenland deal takes down the temperature a lot, given the happenings over the weekend. Less tariffs is unequivocally a positive for markets,” said Joe Gilbert, portfolio manager at Integrity Asset Management. “It seems like the game of chicken is over for now which is constructive for markets.”
Still, Trump did not detail the parameters of the so-called “framework” and it was unclear what the agreement entails, especially since Denmark earlier on Wednesday ruled out negotiations over ceding the semi-autonomous island to the US.
Treasury Secretary Scott Bessent encouraged US allies enraged by Trump’s threats to “sit back” and “take a deep breath,” avoiding retaliation. Commerce Secretary Howard Lutnick foreshadowed the retreat during a Davos panel, telling the assembled world leaders and business titans that the situation was “going to end in a reasonable manner.”
See also: Asian stocks rise, gold near US$5,000 on weak dollar
Global bonds found firmer footing after long-dated Japanese debt clawed back some losses following Tuesday’s plunge. Trump’s comments also helped steady Treasuries, with 30-year US yields almost six basis points lower. Yields on the shorter maturities were also lower.
Meanwhile, an auction of 20-year Treasury bonds drew good demand. Yields in the 20-year sector peaked near 4.90% on Tuesday, about 15 basis points higher since the auction was announced last week. Their subsequent retreat suggested investors saw a buying opportunity.
“There was definitely some worry that given the recent geopolitical turmoil we might have seen a bit lower demand heading into the auction,” said Jan Nevruzi, an interest-rate strategist at TD Securities. It was mitigated by the Davos comments, higher yields and the Treasury market’s ability based on its size to withstand “marginal reallocations.”
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Separately, Citadel’s Ken Griffin said heavy selling of Japanese government bonds this week should serve as an “explicit warning” to US politicians to improve the nation’s finances.
In US economic data, pending sales of US existing homes fell in December by the most since April 2020, an unusually large drop after the housing market appeared to be gaining some momentum.
Uploaded by Isabelle Francis
