Trump Walks Back Tariff Threats, U.S. Stocks Extend Rally, Gold Hits Another Record High

Market Overview

U.S. risk sentiment staged a decisive rebound yesterday as geopolitical concerns continued to ease and stronger-than-expected U.S. economic data reinforced investor confidence. Major U.S. equity indices advanced for a second consecutive session, fully recouping losses recorded earlier this week.

Small-cap stocks remained exceptionally strong, outperforming the S&P 500 for a 15th straight session and pushing to fresh record highs. The “Magnificent Seven” led a broad-based tech rebound, with Meta surging 5.6% on strong momentum, while Tesla gained more than 4%.

On the macro and rates front, robust growth data further dampened market expectations for near-term rate cuts by the Federal Reserve. The rate-sensitive 2-year U.S. Treasury yield rose by 2.5 basis points, while the 10-year yield held near late-session levels from the prior day.

FX and Crypto Performance:

The U.S. dollar weakened notably, with the Dollar Index sliding 0.5% and briefly approaching the 98 level. Cryptocurrencies retreated broadly as some capital rotated back into equities, with Bitcoin down 1.13% and Ethereum falling 2.7%.

Commodities Enter Another Frenzy:

Precious metals shattered records across the board as a softer dollar amplified both safe-haven demand and inflation-hedging flows. Spot gold surged 1.8%, breaking above USD 4,900 per ounce for the first time in history. Silver futures in New York jumped 4%, while spot platinum soared more than 6.3%, with both metals marking all-time highs.

Crude oil prices moved lower as fundamentals weighed on sentiment. U.S. EIA data showed crude inventories rising by 3.6 million barrels last week, well above expectations, sending oil prices down roughly 2%.

Key Themes Ahead

● The Feds Preferred Inflation Gauge Meets Expectations

According to data from the U.S. Bureau of Economic Analysis, the Feds preferred inflation measure, PCE inflation, came in broadly in line with expectations. U.S. personal spending grew at a solid pace in November, indicating that consumer demand remained resilient at the start of the holiday shopping season. However, the household saving rate continued to decline, warranting close monitoring.

● Sharp Shift in Trumps Stance on Greenland

From military posturing to an abrupt withdrawal of tariff threats, Donald Trumps policy volatility has unsettled Europe. EU officials have openly described him as unpredictable, warning that this may be a calculated tactic to sow divisions among allies. With rhetoric suggesting that military action could occur “as early as tomorrow,” transatlantic trust is eroding, and Europe is increasingly alert to the risk that this episode could mark the opening chapter of the next geopolitical crisis.

Events to Watch (GMT+8)

22:45 US

• S&P Global U.S. Manufacturing PMI (January, preliminary)

• S&P Global U.S. Services PMI (January, preliminary)

23:00 US

• University of Michigan Consumer Sentiment Index (January, final)

• University of Michigan 1-Year Inflation Expectations (January, final)

• Conference Board Leading Economic Index (November, MoM)