The FTSE 100 tumbled back towards the 10,000 mark today as Donald Trump intensified his push to take control of Greenland.
In a turbulent session for investors, the blue-chip index fell more than 140 points in early trading to 10,051, having hit a record high of 10,238 last week.
The FTSE 100 clawed back some ground later on to close down 68.6 points at 10,126.8
The losses were mirrored across Europe with the main German benchmark the Dax down 1 per cent and France’s CAC 40 shedding 0.6 per cent.
All eyes were on Wall Street as it opened for the first time since Trump’s move on Greenland, having been closed on Monday for Martin Luther King Day. Rattled investors selling up led the S&P 500 to fell 2 per cent today, while the Dow Jones was down 1.8 per cent.
With the US President due to hold discussions over Greenland at the World Economic Forum in Davos this week, Neil Wilson, UK investor strategist at Saxo, said ‘geopolitical drama in spades’ is driving markets worldwide.
There were further gains for gold and silver as investors worried about the state of the world looked for somewhere safe to park their cash – and again chose precious metals.
Donald Trump is due to hold meetings over Greenland in Davos this week
Gold jumped above $4,700 an ounce for the first time, rising to $4,761, while silver hit a fresh high above $95.50 an ounce.
The record-breaking rally in precious metals has left gold within touching distance of $5,000 an ounce and silver $100 for the first time – levels that seemed improbable not so long ago.
Silver has more than tripled in value since the start of last year making it one of the best performing assets.
Trump’s plans to seize Greenland have sparked alarm in capital cities around the world and rattled financial markets amid fears of the collapse of NATO, a new front in the global trade wars and even recession.
Trump has vowed to impose a 10pc tariff on imports from countries willing to defend Greenland – including the UK, Denmark, Finland, France, Germany, the Netherlands, Norway and Sweden.
The levy would take effect next month and rise to 25 per cent come June.
In response, European leaders are reported to be considering a ‘bazooka’ of measures, including restrictions on US firms in the EU market.
The International Monetary Fund has warned against a ‘spiral of escalation’ with its chief economist Pierre-Olivier Gourinchas declaring: ‘There are no winners in trade wars.’
The issue is set to dominate this week’s World Economic Forum in Davos, Switzerland.
Kyle Rodda, senior market analyst at Capital.com, said there’s hope that the escalating tensions will be self-limiting ‘if the markets send a signal that his actions are bad for investors and the economy’.
‘But there’s the risk that’s not the case and we are heading for a potentially disruptive standoff between the US and EU,’ he added.
Russ Mould, investment director at AJ Bell, said the mood on the markets could quickly darken if the political fallout intensifies.
‘Despite a difficult start to the week it feels like the market is still in wait-and-see mode over whether there will be a full-blown trade war between the US and Europe,’ he said.
‘On the market Richter scale this is little more than a mild tremor – for now. However, the stakes feel high as world leaders, including Donald Trump, prepare to meet at the World Economic Forum in Davos.
‘Investors will be hoping for some sort of de-escalation deal on Greenland which removes the risk of a break-up or at least serious rupture in the NATO alliance. If the crisis deepens it is unlikely to spell good news for global equities.’
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
Freetrade
Freetrade
Investing Isa now free on basic plan
Trading 212
Trading 212
Free share dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
