Dollar, Treasury prices fall amid Trump Greenland push

The “sell America” ​​trade is in full swing Tuesday morning after President Donald Trump and European leaders escalated tensions over Greenland.

US bond prices fell and yields rose. US Dollar IndexThe dollar, which weights the greenback against a basket of six foreign currencies, fell almost 1%. The euro gained 0.7 percent against the dollar.

“This is ‘selling America’ again within a much broader context of global exposure,” Krishna Guha, head of global policy and central banking strategy at Evercore ISI, said in a note to clients.

precious metals gold And silver marched towards new heights. Gold, which has long been considered a safe haven investment in times of geopolitical turmoil, is on its way to realize its biggest one-day gain since October.

US stocks fell as investors reduced their exposure to American assets. Dow Jones Industrial Average Lost over 700 points S&P 500 And Nasdaq Composite each fell more than 1%.

The latest flare-up in the so-called sell-America position comes after Trump threatened to impose 10% tariffs on eight European countries as part of his effort to seize Greenland. Representatives of the 27-nation European Union met for an emergency meeting in response to Trump’s call for tariffs that he said would start on February 1 and rise to 25% on June 1.

Greenland has repeatedly rejected Trump’s request to purchase the arctic island; Prime Minister Jens-Frederik Nielsen said on Monday that there would be “no pressure” and that he would “stand firm on dialogue, respect and international law”. European officials are reportedly considering using a counter-salvo of tariffs and other punitive economic measures against the United States in retaliation.

The “sell America” ​​trade suggests that global investors will place a higher risk premium on US investments due to fears that the US is no longer a reliable trading partner. Following Trump’s latest threats, some investors are worried that European countries may sell US assets in a show of power.

“On the other side of trade, deficit and trade wars, there is capital and capital wars,” Bridgewater Associates founder Ray Dalio told CNBC’s “Squawk Box” program at the World Economic Forum in Davos, Switzerland. “If you take conflicts into account, you cannot rule out the possibility of capital wars. In other words, perhaps there is not the same tendency to borrow from the United States.”

The decline in the US Dollar Index was the biggest since Trump imposed sharply higher tariffs in April, on the so-called Independence Day, many of which were later withdrawn.

International markets, US markets Martin Luther King Jr. After starting to retreat on Monday, when it was closed for the holiday, it continued its decline on Tuesday. Trump’s latest threats to impose tariffs on French wine and other imports have rattled investors who fear the United States can no longer act as a steadfast trade ally of Europe. Pan-European Stoxx 600 It continued its recent decline, falling nearly 1% at midday on Tuesday after Asian markets turned red.

Evercore ISI’s Guha said the dollar’s decline and euro’s rise showed global investors were looking to “reduce or hedge their exposure to a volatile and unreliable US.” Guha said the effects on the dollar and other U.S. assets could be severe and long-lasting if Trump doesn’t back down or find a compromise on the “TACO” or “Trump Is Always Afraid” trade plans put forward last spring.

“What needs to be determined is the magnitude and duration of these dynamics,” Guha said.

More broadly, investors may be looking to move away from U.S. stocks at a time when indexes are near all-time highs and American stocks account for the majority of the world’s total market value, according to AJ Bell investment director Russ Mould.

“Markets may already be pricing in the full concept of American exceptionalism, barring at least some epic, crackpot economic expansion,” Mold said. “So it may not take much to convince investors to hedge and diversify their bets.”

— CNBC’s Jeff Cox, Yun Li and Chloe Taylor contributed to this report.