Stock markets have fallen on both sides of the Atlantic as Donald Trump stepped up his rhetoric in the push for US control of Greenland.
The UK’s FTSE 100 index dropped 1% on Tuesday, accelerating from a smaller fall on Monday and putting it on track for its biggest single-day drop since November.
In Europe, France’s Cac 40 share index dropped 1.1%, Germany’s Dax fell 1.5% and Italy’s FTSE MIB was off 1.5%.
The US dollar, normally also considered a safe-haven asset, dropped nearly 1% against a basket of other leading currencies.
The full extent of the market shakeout has not been felt yet in the US, where markets were closed on Monday to commemorate Martin Luther King Jr day. But pre-market trading suggested that US stocks will also drop at the opening bell, with US futures pointing to a 1.4% fall.
Gold and silver hit record highs as investors sought shelter from the market falls. Gold rose past $4,700 (£3,496) an ounce for the first time on Tuesday, and silver hit a fresh high of $95.52 an ounce.
Trump wrote in a social media post on Saturday that eight European countries including the UK, France and Germany, will face tariffs “until such time as a Deal is reached for the Complete and Total purchase of Greenland”. The tariffs are due to start at 10% on 1 February, rising to 25% on 1 June.
On Tuesday the US president, who is preparing to speak at the World Economic Forum in Davos, Switzerland, on Wednesday, said Britain’s decision to cede the Chagos Islands to Mauritius was among the reasons he wants to take over Greenland.
US cruise operators could be among the worst hit in the market falls, and shares in Carnival Corp, Royal Caribbean and Norwegian Cruise Line Holdings were down by about 3% in pre-market trading.
Fashion companies are also expected to fall, as investors count the possible costs of higher tariffs for retailers. Shares in the athletics brand Under Armour were down 3.6% in pre-market, and Ralph Lauren was down 2.4%. Abercrombie and Fitch was poised to fall by 3.5%.
Trump also added further uncertainty to global trade overnight by threatening to impose 200% tariffs on French wines and champagne after France’s Emmanuel Macron was reported to be unwilling to join his “board of peace” on Gaza.
The comments sent shares in owners of French drinks brands falling. The luxury group LVMH – which owns Dom Pérignon, Moët & Chandon and Veuve Clicquot – dropped 2.4%, and the Telmont champagne owner Rémy Cointreau fell 1.5%.
The AJ Bell investment director, Russ Mould, 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.
“US futures were pointing to losses when Wall Street resumes trading after Martin Luther King day. Nasdaq looks set to chalk up the biggest declines amid concern about possible retaliatory action from Europe against America’s big tech contingent.
“Heightened tensions continue to push precious metals prices higher and gold bugs will be eyeing the $5,000 per ounce mark after it moved through $4,720.”
