Asian equities declined 0.5% while contracts for S&P 500 were down 1.1%.
The yield on the benchmark US 10-year bond gained three basis points to 4.26% in a catchup move as cash trading resumed on Tuesday after a holiday. Yields on the 30-year gained almost four basis points. On another note, on Monday, European stocks declined the most since November.
In other corners of the market, the dollar edged higher against almost all major currencies. Gold and silver were a touch lower after closing at record highs. Cryptocurrencies also declined, with Bitcoin trading close to $92,500.
The yen was steady in early trading Tuesday after Japanese Prime Minister Sanae Takaichi officially called an early election next month. The nation’s 40-year bond yield rose to 4% on Tuesday, the highest since its debut in 2007, while investors awaited an auction of 20-year debt.
Trump’s threat to impose tariffs on countries opposing his bid to control Greenland, and the pushback from Europe, have reignited the market volatility seen early in his second term. The move comes against a backdrop of renewed concerns over the Federal Reserve’s independence and Trump’s push to cap credit-card rates.
The US-Europe standoff comes as resilient earnings and ongoing investment in artificial intelligence have underpinned risk appetite. Market direction now partly depends on the European Union’s response, with the bloc considering tariffs on €93 billion ($108 billion) worth of US goods.
French President Emmanuel Macron intended to request the activation of the EU’s so-called anti-coercion instrument. German leader Friedrich Merz, however, said Monday that his country’s heavier dependence on exports means it’s less willing to unleash the countermeasure.
Trump is scheduled to address the World Economic Forum in Davos on Wednesday.
In Asia, investors are monitoring Japanese sovereign debt on Tuesday following the election announcement. Bond yields extended their gains after jumping on Monday as reports of a tax cut proposal renewed concerns about Takaichi’s stance on fiscal policy.
The prime minister also said the vote would provide a mandate for fundamental changes to strengthen both economic and defense policy, adding that no one will help a country that can’t help itself.
With inputs from Bloomberg
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