European Midday Briefing : Stocks Stall on Strained U.S.-Europe Relations

MARKET WRAPS

Stocks:

European markets stumbled Friday after rallying in the prior session, dragged down by a lack of clarity over the future of Greenland and concerns about U.S.-Europe relations.

Trump's U-turn on threats of military action and punitive tariffs over the territory has restored calm to markets. But European leaders are bracing for more shocks to the trans-Atlantic relationship in the coming months.

Reflecting the mood, gold surged to a new record high as it approaches the $5,000-an-ounce milestone.

In Davos, Christine Lagarde is speaking this morning alongside the WTO's Ngozi Okonjo-Iweala on the final day of this year's World Economic Forum .

Meanwhile, German business activity accelerated at the start of the year, though there was a drop in France. In the U.K, retail sales unexpectedly rose in December.

U.S. Markets:

Stock futures turned negative, reversing an early advance.

Markets had moved higher Thursday against a backdrop of uncertainty surrounding a potential Greenland deal touted by Trump.

The University of Michigan Final Consumer Survey for January is due in a day shy of obvious data or corporate catalysts.

Stocks to Watch

Intel skidded 11% in offhours trading after swinging to a quarterly loss.

Forex:

The dollar rose in the wake of Trump backing off his threat for Greenland-related tariffs.

"We do not think that the tariff threat has much remaining credibility," Standard Chartered said.

The euro fell but was little moved after a measure of eurozone manufacturing and services activity met expectations.

Sterling trimmed its losses against the dollar slightly and edged higher versus the euro after the data showing a return to growth for U.K. retail sales.

The yuan strengthened against the dollar in offshore and onshore markets. The PBOC on Friday set the USD/CNY fixing at 6.9929, below the 7.0000 level for the first time since May 2023, CFETS data showed.

Yen moves have been erratic in the wake of the Bank of Japan's meeting earlier, where it held rates steady as widely expected.

Bonds:

Yields on U.S. government bonds fell , continuing a trend since Trump's rhetoric over Greenland eased.

A sharp selloff in Japanese government bonds earlier in the week that impacted global bond markets has also calmed.

SEB analysts expect that Treasury yields will now "retrace most of their recent rise."

The risk of U.S.-Europe tensions re-emerging remain, alongside concerns over the independence of the Federal Reserve.

Eurozone government bond yields traded steady.

Bund yields stay higher after earlier stronger-than-expected German PMI data. French yields remained lower after worse-than-anticipated French composite PMI.

Commerzbank sees value buying eurozone government bonds versus Treasurys .

Energy:

Oil prices rose in early trading as investors closely monitor developments in Iran.

Trump said the U.S. is watching Tehran closely and has an "armada" heading toward the region, though he said he hopes it won't be needed.

The gains come despite signs of progress in Ukraine peace talks and persistent concerns about excess supply in global markets.

Metals:

Gold prices surged to a fresh record, pushing closer to the $5,000-an-ounce milestone on heightened geopolitical risks, economic uncertainty and a weaker dollar.

"The rally is being fueled by FOMO [fear of missing out], alongside continued focus on broader hard-asset-supportive drivers following a slight easing in U.S.-EU tensions," Saxo Bank said.

Pepperstone said the precious metal increasingly looked like a hedge against Trump's "unpredictability."

Iron ore

Prices rose in early Asian trading Looking ahead, Nanhua says it isn't overly pessimistic about hot metal demand and expects downside risks to be limited , given robust restocking needs.

Copper

TD Securities expects deeper backwardations in LME copper , as incentives to stockpile clash with limited supplies of physical metal.

EMEA HEADLINES

Business Activity Picks Up in Parts of Europe and Asia

Business activity in a number of large economies across Europe and Asia picked up at the start of the year, with signs of a rebound in export orders as the global economy adjusts to the increase in U.S. tariffs.

Data firm S&P Global said Friday that its measure of activity at manufacturers and service providers in the eurozone was unchanged at 51.5 in January. However, that reflected a drop in activity in France, while growth accelerated in Germany and continued in other parts of the currency area.

BASF Shares Drop After Earnings Miss Guidance

BASF shares fell Friday after the German chemical group prereleased earnings that fell short of both its guidance and consensus expectations.

Shares were 1.6% lower in early European trade.

Ericsson Shares Jump on Earnings Beat and Cash Returns

STOCKHOLM-Ericsson shares surged Friday after the Swedish telecommunications-equipment company announced forecast-beating earnings and bumper shareholder returns.

Shares jumped as much as 12% in early European trade.

Sanofi Says Its Amlitelimab Drug Showed Promising Results in Treating Eczema

Sanofi said its amlitelimab drug confirmed its potential to treat eczema in two late-phase studies.

The French drugmaker said Friday that amlitelimab delivered results that supported its potential to treat patients 12 years and older with moderate to severe eczema, a condition that causes itchy, dry and inflamed skin. The treatment was well-tolerated and demonstrated a safety profile in line with previous data, it said.

U.K. Retail Sales Rose Unexpectedly Over Christmas

U.K. retail sales unexpectedly picked up in December, providing a boost for the economy over the key holiday period.

Retail sales volumes were 0.4% higher on month, after a 0.1% fall in November, the Office for National Statistics said Friday. This came in above a consensus of economists polled by The Wall Street Journal which had expected a fall of 0.1%.

GLOBAL NEWS

China Signals Tolerance for Stronger Yuan

SINGAPORE-China's central bank set the strongest reference rate for the yuan in almost three years, signaling it is willing to allow the currency to gradually gain amid growing calls for appreciation.

Trump Administration Pushes Out Key Officials Focused on China Tech Threat

The Trump administration pushed out two officials focused on neutralizing technological threats from China, people familiar with the matter said, in the latest dismissals of key personnel working on national-security issues tied to Beijing.

The departures, from an office within the Commerce Department's Bureau of Industry and Security, alarmed some U.S. officials and security hawks already concerned with what they described as the Trump administration's softening stance toward China as trade talks between the two sides continue.

Alarm Over Trump's Greenland Threat Gives Way to Uncertainty Around Future Deal

President Trump has stepped back from the brink on Greenland. The question now is what happens next.

After days of frenzied diplomacy, the U.S. president said on Wednesday that he had "formed a framework for a future deal" on Greenland and that he didn't intend to use force to take control of the icebound island. But details were hazy, and European officials on Thursday seemed to be willing to talk about it only in vague terms, saying only that it would bolster security in the Arctic.

China Sees a Chance to Lure Jaded U.S. Allies

HONG KONG-China has seized upon the disarray left by President Trump within the trans-Atlantic alliance, denouncing his push to acquire Greenland and trying to entice U.S. allies with the promise of reliable trade partnerships.

But as some of Washington's traditional allies tiptoe closer to Beijing, they appear clear-eyed about the danger of leaving the U.S. embrace only to end up in the hands of another superpower.

The West Stepped Back From the Brink. But Europe's Distrust of America Lingers.

DAVOS, Switzerland-The West avoided an open rupture this week. But, instead of celebrating, European leaders are bracing for more serious shocks to the trans-Atlantic relationship in the months ahead.

"We are not yet out of the woods," Latvia's President Edgars Rink?vi?s said in an interview in Davos on Thursday, after President Trump U-turned on threats of military action and punitive tariffs to seize Greenland from Denmark. "Are we in an irreversible rift? No. But there is a clear and present danger. If we want to preserve the alliance, both sides need to be very, very careful."

Write to [e-mail]

Write to us at [e-mail]

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

01-23-26 0519ET