By Ankur Banerjee
SINGAPORE, Jan 20 (Reuters) – Asian stocks fell on Tuesday, while the dollar remained under pressure and the U.S. Treasury yields climbed to their highest level in more than four months, as a resurgence of trade-war concerns hit risk sentiment and sparked selling in U.S. assets.
U.S. President Donald Trump’s push to take control of Greenland by threatening additional tariffs – a move that risks fuelling trade tensions with Europe – has led to uncertainty in the markets with investors scurrying for safe-haven assets including the Swiss Franc and gold.
The tensions have revived talk of the ‘Sell America’ trade that emerged in the aftermath of his sweeping “Liberation Day” levies last April, where investors sell U.S. stocks, dollar and Treasuries. That trade appeared to be gathering momentum in Asian hours on Tuesday.
Nasdaq and S&P 500 futures slid 1% in early trade, while the dollar remained vulnerable and the yield on 10-year U.S. Treasury note rose to 4.265%, its highest level since early September.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.44% lower, inching further away from the record highs it hit last week.
MUFG’s Europe economist Henry Cook said last year has “taught us not to overreact to Trump’s threats”, noting European policymakers will look to pursue dialogue and negotiation first in the hope of at least buying some more time.
Trump’s threats triggered a sharp pushback in Europe and his remarks have raised questions on the outlook of trade deals struck since then with Europe.
“Even if there is de-escalation this episode will still cause many to doubt the credibility of any deal with Trump and so tariff uncertainty will remain elevated,” Cook said.
Citi has downgraded European equities as the strategists note that the latest step-up in tensions and tariff uncertainty dents the near-term investment case for European equities, casting doubt on broad-based earnings inflection in 2026.
European futures were 0.12% lower, pointing to another mellow open later in the day.
All eyes will now be on Davos where Trump is expected to meet global business leaders on Wednesday, sources told Reuters, as the U.S. president’s presence looms large over the annual gathering of the global elite in Switzerland.
Meanwhile, Japan’s Nikkei fell 0.8% and the yen last bought 157.92 per dollar as investors looked ahead to next month’s election with Prime Minister Sanae Takaichi seeking voter backing for increased spending, tax cuts and a new security strategy that is expected to accelerate a defence build-up.
A sale of long-term Japanese government bonds (JGBs) on Tuesday will provide an early test by the markets of Takaichi’s election campaign pledge to cut taxes.
Short- and long-term JGB yields surged to record highs on Monday on concerns that tax cuts, touted by both Takaichi’s ruling Liberal Democratic Party and opposition groups, will worsen the government’s already strained finances.
In commodities, gold was little changed at $4,670 per ounce, just shy of the record high touched on Monday. [GOL/]
(Reporting by Ankur Banerjee in Singapore; Editing by Himani Sarkar)
