A trader works next to the American flag at the New York Stock Exchange after Republican Donald Trump won the US presidential election on November 6, 2024 in New York.
Andrew Kelly Reuter
The “Sell America” trade was in full swing Tuesday morning after President Donald Trump and European leaders escalated tensions over Greenland.
U.S. bond prices have fallen and yields have soared. of us dollar indexComparing the dollar against a basket of six foreign currencies, it fell nearly 1%. The euro rose 0.7% against the dollar.
“This is yet another ‘selling America’ within a broader global risk-off,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note to clients.
dollar index, 1 day
precious metal gold and silver A new high was reached. Gold, long seen as a safe bet during times of geopolitical turmoil, posted its biggest single-day gain since October.
US stocks fell as investors reduced their exposure to US assets. of Dow Jones Industrial Average Although it fell by more than 700 points, S&P500 and Nasdaq Composite Each fell more than 1%.
The latest escalation in the so-called “Sell America” position comes in the wake of President Trump’s threat to impose 10% tariffs on eight European countries as part of his push to take over Greenland. Representatives from the 27 European Union (EU) countries gathered for an emergency meeting in response to President Trump’s announcement that tariffs would begin on February 1st and rise to 25% on June 1st.
Greenland has repeatedly rejected President Trump’s requests to buy the Arctic island, and Prime Minister Jensfrederik Nielsen said on Monday that it would “not be pressured” and “remains steadfast in dialogue, respect and international law.” European officials are reportedly considering imposing counter-tariffs and other punitive economic measures against the United States in retaliation.
The ‘Sell America’ deal suggests that global investors will place a higher risk premium on investments in the US amid concerns that the US is no longer a reliable trading partner. President Trump’s latest threats have some investors worried that European countries could dump American assets in a show of power.
“Behind the scenes of trade, deficits and trade wars, there are capital wars and capital wars,” Bridgewater Associates founder Ray Dalio told CNBC’s “Squawk Box” at the World Economic Forum in Davos, Switzerland. “Given the conflict, we cannot ignore the possibility of a capital war. In other words, the propensity to buy things like U.S. government bonds may not be the same.”
The drop in the U.S. dollar index was the biggest since President Trump implemented steep tariff hikes on so-called “Emancipation Day” in April, many of which have since been cut.
After U.S. markets began falling on Monday, when they were closed for the Martin Luther King Jr. Day holiday, international markets continued to fall on Tuesday. President Trump’s recent threat to impose tariffs on French wine and other imports has spooked investors who feared the United States would no longer act as Europe’s steadfast trade ally. pan-european Stocks 600 The stock’s recent decline widened, falling about 1% by midday on Tuesday, as Asian markets fell into the red.
STOXX Europe 600, 1 day
Evercore ISI’s Guha said the weaker dollar and stronger euro suggest global investors are looking to reduce or hedge their exposure to the “volatile and unreliable” United States. Guha said the impact on the dollar and other U.S. assets could be severe and long-lasting unless President Trump withdraws his plan (a deal created last spring known as TACO, or “Trump Always Chickens Out”) or finds a compromise.
“What remains to be determined is the scale and duration of these dynamics,” Guha said.
More broadly, investors may be looking for ways to diversify away from U.S. stocks as indexes near record highs and U.S. stocks account for the majority of global market capitalization, said Russ Mold, investment director at AJ Bell.
“Markets may already have fully priced in the concept of American exceptionalism, at least unless there is an explosive economic boom,” Mold said. “So it may not take long to convince investors to hedge their bets and diversify.”
—CNBC’s Jeff Cox, Yun Li and Chloe Taylor contributed to this report.
