Trump’s Davos Speech Eases U.S.–Europe Tensions

Market Overview

Japans 10-year government bond yield retreated below 2.3%, while the U.S. 10-year Treasury yield fell from 4.30% to 4.24%. Earlier this week, political and economic instability in Japan triggered a wave of selling pressure across global bond markets, though conditions stabilized in the latest session. USD/JPY continued to trade sideways around the 158 level, easing concerns over a renewed carry trade deleveraging cycle.

Market sentiment improved further after former President Donald Trump delivered a speech at the World Economic Forum in Davos, signaling progress toward negotiations between the U.S., Greenland, and Nordic countries, and announcing the cancellation of a planned 10% tariff scheduled for February 1. U.S. equity markets rebounded sharply, with all four major indices advancing after the previous days sell-off.

As risk-off sentiment faded, gold briefly broke above the USD 4,800 per ounce level before pulling back. During the Asian session, spot gold was trading around USD 4,788 per ounce.

Key Themes to Watch

U.S.–Europe De-escalation: Trump Cancels Planned Tariffs

In his Davos address, Trump stated that Greenland represents a core U.S. national security interest, but emphasized that the United States would not pursue territorial acquisition through military means and instead seeks immediate negotiations. He reiterated that the U.S. has long been treated unfairly within NATO, criticized Europe for losing direction on green transition and immigration, and argued that the U.S. needs strong, not weakened, allies.

Trump also said he expects to nominate a new Federal Reserve Chair “in the near future,” adding that policy behavior could change under new leadership but must ultimately “do the right thing.” He claimed the U.S. has already defeated inflation and projected fourth-quarter economic growth of 5.4%. Recent declines in U.S. equities were described as “insignificant,” with Trump predicting that stock markets could double in the future. He further emphasized strong support for nuclear energy development, rejected the idea of the U.S. becoming a “nation of renters,” reiterated his stance on lowering credit card interest rates, and warned that Hamas would face swift destruction if it refuses peace.

Following the speech, Trump again addressed the Greenland issue, once more ruling out the use of military force. Denmark, however, rejected immediate negotiations over any U.S. annexation of Greenland.

Trump Signals Continuation of a ‘Goldilocks Economy’ and a New Internet-Style Boom

Trump suggested he may have already selected a candidate for the next Federal Reserve Chair, expressing a preference for someone in the mold of Alan Greenspan, while once again implying that Kevin Hassett is no longer under consideration. He stated that the shortlist had narrowed from three candidates to two, and possibly to just one in his mind.

Trump named BlackRock executive Larry Fink and former Federal Reserve Governor Kevin Warsh as suitable candidates. He added that if Jerome Powell were to remain as a Fed governor, his influence would likely be limited. Trump reiterated comments made last Friday, noting his preference for Hassett to remain in his current role as a White House economic advisor.

Key Events to Monitor (GMT+8)

20:30 ECB releases minutes from its December monetary policy meeting

21:30 U.S. initial and continuing jobless claims

23:00 U.S. November PCE Price Index, Eurozone January Consumer Confidence (preliminary)

23:15 World Economic Forum annual meeting panel on global growth, with IMF Managing Director Kristalina Georgieva participating, World Economic Forum annual meeting panel discussion on the Middle East economy