Davos détente

The pan-European STOXX index was up more than 1% in early trading on Thursday, following the S&P 500's 1.16% rise yesterday – its biggest in two months – on news of the Greenland deal. The VIX index, or so-called fear gauge, fell back towards baseline levels after hitting a year-to-date high on Tuesday.

Gold slipped from Wednesday's all-time high of $4,887.82 per ounce as tensions eased and investors sought riskier assets, but it remains elevated above $4,800 amid the still febrile geopolitical situation.

Indeed, details about the deal struck by Trump and NATO secretary-general Mark Rutte remain sparse. While Trump's sudden shift in tone has defused tensions, European diplomats noted the dispute was not yet resolved and Denmark's Foreign Minister Lars Lokke Rasmussen reiterated the importance of Danish sovereignty and Greenlandic self-determination.

Whatever was agreed, it will not involve a U.S. takeover of Greenland. Trump noted all parties were "very happy" with the deal, which he said touched on security and minerals and would last "forever". Secretary-General Rutte said on Thursday the deal would focus on guarding against Russian and Chinese influence in the Arctic and that NATO allies would have to step up on security in the region.

Meantime, Treasury yields retreated, helped by a decent 20-year bond auction and signals from the U.S. Supreme Court on Wednesday that justices would not support Trump's attempt to fire Fed Governor Lisa Cook. Conservative justice Brett Kavanaugh, for instance, noted that a "low bar" for dismissals by the president would "weaken, if not shatter, the independence of the Federal Reserve".

The Fed is expected to hold rates steady at its January meeting, and investors will get more clues on the policy outlook on Thursday with the release of November's PCE inflation estimate, the Fed's preferred inflation gauge.

Attention now switches back to the corporate earnings season. Intel tops today's calendar, with its stock surging 12% on Wednesday ahead of the report. Its fortunes improved last year due to the AI data center boom and the U.S. government's decision to take a stake in the company.

Other chipmakers jumped on Wednesday too, with South Korea's stocks racing ahead on Thursday, now easily making the country's index the best performer of the year with gains near 20%.

Global investors began the year drunk on booming growth, record stocks and tech euphoria. Despite Wednesday's U-turn on the Greenland row, U.S. President Donald Trump's erratic tariff threats should prompt investors to question some of that extreme optimism.

This week's sudden market disturbance hinged on fears of escalating transatlantic trade tensions after Trump threatened more tariffs on Europe unless the U.S. was allowed to take over Danish-controlled Greenland. Europe balked at the move, vowing retaliation for any related tariffs.

With perhaps half an eye on the resulting debt market jolt at home, Trump abruptly stepped back late Wednesday ‌from the tariff threat, just four days after he announced it - claiming NATO assurances on Greenland security.

But the prospect of another year of such brinkmanship and repeated sideswipes at international alliances and trade relations may yet prompt a more careful approach to the overwhelming market consensus that greeted the year.

Bank of America conducted its first monthly global funds survey of 2026 just before the Greenland row blew up last weekend. Even so, the results revealed how extreme market positioning and thinking were as the year kicked off.

Graphics are produced by Reuters.

Graphics are produced by Reuters.

Intel shareholders are more optimistic about the company's results than they have been for many quarters. Investors are betting the turnaround CEO Lip-Bu Tan promised is taking root, both because rapid data center buildouts are fueling demand for its traditional server chips and because the U.S. government took a stake in the chipmaker last year. Intel's stock surged another 12% on Wednesday, ahead of its quarterly earnings report due out later today, bringing its gains for the past 12 months to 152%.

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