ORLANDO, Florida, Jan 22 (Reuters) – World stocks leaped on Thursday after U.S. President Donald Trump agreed a framework of a deal on Greenland and withdrew his threat to slap new tariffs on several European nations, while investors also cheered upbeat U.S. economic data.
More on that below. In my column today I look at the “Sell America” narrative that is back with a vengeance, and pose the question: will Trump’s bellicose policy agenda prompt the world to reduce its $27 trillion “long USA” position?
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
Today’s Key Market Moves
Today’s Talking Points
* Return of the ‘TACO’ trade
Trump’s climb-down on Greenland and on the threat of new tariffs on Europe probably had several explanations, but one of them is surely the adverse U.S. market reaction earlier this week that saw Wall Street, Treasuries and the dollar all fall sharply together.
With mid-term elections looming in November, the affordability crisis is a priority. Mortgage rates are falling but they’ve not been below 6% since 2022, and more than half of current mortgages are higher than 6% – the last thing Trump wants is a spike in long-term yields and a stock market slump. It seems the “Trump always chickens out” trade is alive and well.
* The U.S. growth juggernaut
For all the teeth-gnashing over trade wars, inflation, and global geopolitical fractures, the U.S. economy seems pretty robust. Third-quarter GDP was revised up to a 4.4% annualized rate on Thursday, the fastest pace in two years, and sharply up from 3.8% in the second quarter.
Fourth-quarter growth looks even stronger, with the Atlanta Fed’s GDPNow model currently tracking 5.4%. Figures like these bolster the view that growth and inflation risks are skewed to the upside. And if that’s the case, why is the Fed cutting rates?
* Bank of Japan meeting
The BOJ announces its latest policy decision on Friday. The backdrop could not be more challenging – the yen is languishing at historic lows, the bond market is tanking, long-dated yields have rocketed, and the government wants to accelerate spending.
The problem is, offsetting all that with aggressive policy tightening risks torpedoing the bond market. Markets are pricing in a 25-basis-point hike by July and only 20 bps after that – clearly not enough to support the yen. It’s a delicate balancing act.
What could move markets tomorrow?
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(By Jamie McGeever; Editing by Nia Williams)
