Global stocks jumped after U.S. President Trump agreed a framework on Greenland and pulled back from new tariffs on several European nations, while upbeat U.S. growth data reinforced risk taking. The move lifted Wall Street, Europe and Japan in the same session. In the short term this calms trade fears and supports stocks, bonds and carry trades. Over the long term it raises fresh questions about geopolitical policy and whether foreign investors will trim the roughly $27 trillion exposure to U.S. assets. The story matters now because the BOJ meets this week, U.S. growth readings were revised higher, and central bank paths are under renewed pressure across regions.
Market reaction: risk appetite surges
Stocks rally as policy uncertainty eases and data supports growth
Equities rallied across the globe. Wall Street gained as much as 0.8 percent. The Russell 2000 reached a new high. Europe posted its best day in two months. Japan’s Nikkei climbed 1.7 percent. Brazil’s Bovespa rose about 2 percent to a fresh high. Sector action was uneven but tilted positive. Communications stocks led gains while real estate lagged. META Platforms (NASDAQ:META) jumped roughly 5.5 percent on renewed risk appetite. General Electric (NYSE:GE) moved lower on company specific pressure and slumped about 7.4 percent.
Investors cheered the Greenland development because it took an immediate political risk off the table. That lowered the odds of tariff escalation and helped restore confidence in cross border capital flows. However, this does not close the chapter on geopolitical headlines. Market positioning that had shortened U.S. risk could reverse quickly if new policy shocks appear.
Domestic backdrop: U.S. growth looks stronger
Revised GDP and current tracking boost risk assets
U.S. third quarter GDP was revised up to a 4.4 percent annualized rate, the fastest pace in two years. The Atlanta Fed’s GDPNow model is tracking fourth quarter growth near 5.4 percent. Those readings reinforce the sense that growth and inflation risks sit to the upside. That helps explain why yields ticked slightly higher. U.S. Treasury yields rose roughly 1 to 3 basis points on the session.
Stronger growth supports corporate earnings momentum. In addition it raises questions about the timing and size of policy easing from the Federal Reserve. Markets are pricing different paths today versus a few months ago. Foreign inflows to U.S. securities were sizable last year, with official data showing net purchases of about $1.27 trillion through November. That flow was led by private sector demand and the AI investment cycle. Whether that pace continues depends on policy clarity and relative returns across regions.
FX and fixed income: dollar softens, yen remains under stress
Dollar falls while Japan faces delicate policy trade offs
The U.S. dollar index fell about 0.5 percent. The biggest G10 gainers versus the greenback were the Australian dollar, New Zealand dollar, Swedish krona and Norwegian krone, each up near 1 percent. The moves reflect a weaker safe haven bid and improved global risk appetite. Gold and other precious metals rallied. Gold pushed to a record level above $4,900 per ounce while silver rose about 3 percent and platinum gained roughly 6 percent. Oil weakened, down around 2 percent on the session.
Japan remains a focal point. The Bank of Japan meets this week with the yen near historic lows and long-dated JGB yields having spiked recently. JGB yields fell about 5 basis points across the curve on the session, retracing some of the earlier sell off. Markets are pricing a path that could include a 25 basis point move by July while expecting only modest follow through. That creates a difficult balancing act for policymakers. Aggressive tightening to defend the yen could further unsettle the domestic bond market. For now the market is watching carefully for any sign of policy adjustment that would alter yield curves and cross border flows.
Political and institutional drivers: ‘Sell America’ talk returns
Geopolitics and policy rhetoric weigh on longer term positioning
Talk of a “Sell America” trade has reappeared as controversial policy steps earlier in the cycle raised questions about alliances and rules based commerce. That talk did not materialize last year into a wholesale retreat from U.S. assets. Foreign investors still bought large volumes of U.S. securities. Yet the repeated policy sparks have kept the debate alive. The Greenland development reduced some near term headline risk. However, other events including legal cases and regulatory actions will keep capital managers alert.
One notable legal headline this week involves a suit by the U.S. President against JPMorgan Chase (NYSE:JPM) and its CEO. That case highlights the political overlay on major banks and can affect risk premia in financials and credit. Market participants will weigh political noise alongside economic data when they set exposures in coming sessions.
What to watch in the coming session
Davos, central bank decisions and flash PMIs set the agenda
Attention will shift to the World Economic Forum meetings where international policymakers and central bankers speak. Key central bank moments include the Bank of Japan decision and comments from other officials. Economic releases due include Japan inflation for December, flash PMI readings across major economies, Taiwan industrial output and UK retail sales. The U.S. University of Michigan final inflation and consumer expectations reading for January will round out the major datapoints. Any surprises in these releases could quickly change risk appetite and currency flows.
In short, the session opens with improved risk sentiment driven by a thaw in trade headlines and stronger U.S. growth data. Traders will balance that optimism against ongoing political headlines, the BOJ decision and fresh global PMI updates. Markets may continue to test the new tolerance for risk while monitoring whether foreign investors alter their longstanding exposure to U.S. assets.
