London: World stock markets lost ground on Tuesday, while precious metals hit fresh peaks on fears of a US-EU trade war fuelled by Donald Trump's tariff threat over opposition to his ambitions to grab Greenland, which has stoked volatility.
Wall Street was down more than one percent two hours into the day session as traders began the week's US trading, following Monday's Martin Luther King holiday.
Europe's main markets also suffered, London closing off 0.7 percent and Frankfurt ending down 1.0 percent.
Earlier, Tokyo suffered a similar fate even though Asia overall closed mixed.
Gold, seen as a safe-haven investment, notched yet another record high, surpassing the $4,750 an ounce mark. Silver also peaked, touching $95.51 an ounce.
Key bond yields jumped on the heightened trade fears with the US 10-year Treasury note jumping around seven basis points to 4.29 percent while Japanese long-dated bond yields reached record highs.
Kathleen Brooks, research director at XTB, noted that banks and US tech "are at risk from EU tariffs" in response to Trump's tariff blitz and warned this would hurt US blue chips.
Tesla and Amazon were off upwards of 2.5 percent two hours into the US trading day while Nvidia slid 3.5 and multinational conglomerate 3M gave up almost 8 percent after its 2026 earnings forecast fell short of expectations.
"Overall, this is a manmade crisis, and the continued sell off on Tuesday suggests that US threats to Greenland and their effects on financial markets could have further to go if the situation does not deescalate soon," Brooks opined.
Patrick Munnelly at Tickmill Group cited "a wave of global risk aversion following President Trump's announcement of potential tariffs on European nations unless the US is allowed to purchase Greenland".
After a bright start to the year fuelled by fresh hopes for the artificial intelligence sector, investors have taken fright since Trump ramped up his Greenland demands, on grounds of US "national security".
After European capitals pushed back, Trump on Saturday said he would impose 10 percent levies on eight countries -- including Denmark, France, Germany and
Britain -- from February 1, lifting them to 25 percent on June 1.
'Mistake'
The move has raised questions about the outlook for last year's US-EU trade deal, the ratification of which was frozen on Tuesday by the European Union parliament.
Speaking at the Davos gathering in Switzerland, EU chief Ursula von der Leyen warned the United States that hitting allied European nations with punitive tariffs over Greenland would be a "mistake"
"The European Union and the United States have agreed to a trade deal last July. And in politics as in business -- a deal is a deal. And when friends shake hands, it must mean something," she said.
US Treasury chief Scott Bessent on Monday said that any retaliatory EU tariffs would be "unwise".
Trump on Tuesday ramped up his rhetoric against France, warning he would impose 200-percent tariffs on French wine and champagne because it was declining his invitation to join a "Board of Peace".
That body was originally conceived to oversee the rebuilding of Gaza but its charter gives it a much broader, global remit, with Trump in charge.
Key figures at around 1645 GMT
New York - Dow: DOWN 1.1 percent at 48,810.31 points
New York - S&P 500: DOWN 1.1 percent at 6,862.08
New York - Nasdaq Composite: DOWN 1.3 percent at 23,207.94
London - FTSE 100: DOWN 0.7 percent at 10,126.78 points (close)
Frankfurt - DAX: DOWN 1.0 percent at 24,692.79 (close)
Paris - CAC 40: DOWN 0.6 percent at 8,062.58 (close)
Tokyo - Nikkei 225: DOWN 1.1 percent at 52,991.10 (close)
Hong Kong - Hang Seng Index: DOWN 0.3 percent at 26,487.51 (close)
Shanghai - Composite: FLAT at 4,113.65 (close)
Euro/dollar: UP at $1.1733 from $1.1641 on Monday
Pound/dollar: UP at $1.3457 from $1.3428
Dollar/yen: DOWN at 158.03 yen from 158.09 yen
Euro/pound: UP at 87.18 pence from 86.71 pence
Brent North Sea Crude: UP 1.4 percent at $64.85 per barrel
West Texas Intermediate: UP 1.8 percent at $60.50 per barrel
