NEW YORK: Global shares rebounded on Wednesday (Jan 21) from a selloff the previous session after US President Donald Trump said a framework on a future deal over Greenland has been reached.
Trump, who is attending the World Economic Forum in Davos, said the US will no longer be imposing tariffs that had been scheduled to take effect from Feb 1. He had ruled out taking Greenland by force in an earlier speech, which also helped to calm investor nerves.
Wall Street ended higher on Wednesday, with the S&P 500 posting its biggest one-day percentage gain in two months.
Both the Dow Jones Industrial Average and Nasdaq Composite also enjoyed milestone days, gaining the most in percentage terms since Jan 5 and Dec 19, respectively.
The Dow Jones Industrial Average rose 1.21 per cent, the S&P 500 gained 1.16 per cent and the Nasdaq Composite added 1.18 per cent. The benchmark S&P 500 registered its biggest daily percentage gain since Nov 24.
“Markets aren’t rallying because they suddenly understand the endgame in Greenland,” said Matthew Smart, director of financial planning and portfolio analysis at WWM Investments in Chicago.
“They’re rallying because uncertainty just got priced out. The signal from Donald Trump coming out of Davos is coordination, not confrontation, and that matters. Pulling back near-term tariffs, while opening a framework with NATO around Greenland tells investors this is shifting from headline risk to negotiation risk.”
MSCI’s All-World index was up 0.87 per cent, after losing ground in the last session, while Europe’s STOXX 600 index finished a touch lower by 0.02 per cent. Britain’s FTSE index added 0.11 per cent.
The VIX index, which measures demand for protection against big swings in the S&P 500, dropped more than 15 per cent to 17, a day after jumping to its highest since November. The index is often used as a proxy for investor nervousness.
“The market bounced when he said we wouldn’t use force,” said Mark Hackett, chief market strategist at Nationwide in Boston. “Following the events of last April, investors are catching on that his negotiating style is very different than past administrations, so uncertainty is a natural outcome.”
The European Parliament decided to suspend its work on a trade deal between the 27-member bloc and the US, a parliament member said, following Trump’s repeated requests to take control over Greenland. The European Union will convene an emergency summit in Brussels on Thursday to discuss the matter, with the long-standing US-EU alliance at risk.
“You had the Venezuelan thing, you had Greenland and you had Iran and none of these things seemed to be making a huge dent,” said James St Aubin, chief investment officer at Ocean Park Asset Management in Santa Monica, California.
“Obviously we had a pretty significant selloff yesterday but in the grand scheme of things it seems the market should have a hard time making new highs and yet it continues to brush off some of these very provocative ideas that Trump likes to throw around.”
Source: CNA
