Risk-off sentiment intensified into Tuesday afternoon, with U.S. equities extending losses as President Donald Trump's renewed tariff threats tied to Greenland rattled global markets.
Both the S&P 500 and the Nasdaq 100 slid around 2%, marking their worst sessions in more than three months, as selling pressure broadened across Wall Street.
The so-called Magnificent Seven stocks erased roughly $700 billion in combined market capitalization on the day, led by sharp declines in Nvidia Corp. (NASDAQ:NVDA) and AppleInc(NASDAQ:AAPL).
While equities slid, precious metals moved sharply higher. Gold – as tracked by the SPDR Gold Shares(NYSE:GLD) – jumped 1.9% to $4,760 per ounce, hitting fresh record highs as investors rushed to reprice geopolitical and trade risks.
According to deVere Group CEO Nigel Green, the violent shift into safe-haven assets reflects a growing belief that Trump may act on his threats.
"Markets are now behaving as if this is no longer political theatre," Green said. "The surge in gold and the sharp repricing of risk assets suggest investors believe the probability of U.S. action on Greenland has risen materially."
US-EU Trade War Risks Carry Meaningful Economic Costs
Economists warn that an escalation into a full-blown transatlantic trade conflict could carry significant economic consequences.
Analysts at Oxford Economics estimate that if the U.S. imposes an additional 25% tariff on European countries — and Europe responds in kind — U.S. GDP would be about 1% lower than baseline at peak impact.
"The peak hit to the euro area would be similar but more drawn out, while the inflationary impact would be only modestly positive," said Ben May, director of global macro research, and Rory Fennessy, senior economist, in a report released Tuesday.
Given the scale of the U.S. and European economies, Oxford Economics cautioned that the impact would not remain contained. Under such a scenario, global GDP growth could slow to around 2.6%, below the 2.8%–2.9% range seen in recent years and the weakest pace since 2009, excluding the pandemic year.
US Treasuries Fail To Offer Shelter
Notably, U.S. Treasuries failed to provide their usual safe-haven support. Yields continued to rise, pressuring bond prices lower even as equities sold off.
Adam Turnquist, chief technical strategist at LPL Financial, said multiple forces are pushing yields higher.
“Rising deficits, escalating tariff threats and geopolitical tensions — combined with growing concerns over Federal Reserve independence — have pushed Treasury yields higher this year,” he said in an emailed note. “Rising global yields, particularly in Japan, have also reduced the relative appeal of U.S. Treasuries.”
Join thousands of traders who make more informed decisions with our premium features.
Real-time quotes, advanced visualizations, backtesting, and much more.
