Key Points

• U.S. equities rebound on easing trade risk: Markets rallied after President Donald Trump signaled a framework deal on Greenland and backed away from imminent European tariffs, lifting the S&P 500 and broadening gains beyond technology.
• Greenland diplomacy steadies sentiment: Trump’s Davos remarks outlining cooperation with NATO on mineral rights and security reduced near-term geopolitical tail risks, helping reverse the recent “sell America” trade in stocks, bonds and the dollar.
• Japan export momentum falters: December shipments missed expectations as exports to the U.S. fell sharply, highlighting renewed tariff sensitivity for Japan even as a weak yen and Asia demand offered partial offsets.
• South Korea growth undershoots: Fourth-quarter GDP slowed amid a construction slump and softer exports, underscoring vulnerability in South Korea’s export-led model despite strong semiconductor demand and stable policy rates.

January Economic Calendar

Markets Rebound as Greenland Tensions Ease

U.S. equities rebounded sharply after President Donald Trump signaled a pause in planned tariffs on Europe and outlined a preliminary framework for negotiations over Greenland, easing recent geopolitical concerns. The S&P 500, Dow and Nasdaq each rose about 1.2%, while small-cap stocks outperformed, reflecting a broad-based relief rally led by financials and energy. Sentiment improved further after Trump said the U.S. would not pursue control of Greenland by force, following discussions with Mark Rutte. Investors are now turning their focus to the upcoming U.S. inflation report and corporate earnings, with markets still modestly lower for the week despite Wednesday’s rebound.

Trump Signals Greenland Framework, Keeps Markets on Edge

President Donald Trump reinforced market focus on geopolitics and policy direction after telling CNBC in Davos that the U.S. has a “concept of a deal” with NATO regarding Greenland, following talks with Secretary General Mark Rutte. Trump said the framework could involve mineral rights and joint security initiatives, while confirming he had stepped back from imposing near-term tariffs on European allies. Beyond Greenland, the president signaled he has largely settled on a successor to Federal Reserve Chair Jerome Powell, revived support for a temporary credit card interest rate cap, and reiterated a hard line on Iran’s nuclear ambitions. Markets interpreted the remarks as easing immediate trade risks, while underscoring ongoing policy uncertainty around rates, regulation and geopolitics.

Japan Export Growth Falters as U.S. Demand Weakens

Japan’s export momentum softened at the end of 2025, highlighting renewed external pressures despite resilience across Asia. December exports rose 5.1% year on year, undershooting market expectations of 6.1%, as shipments to the United States fell 11.1% after a brief rebound in November, according to data cited by Reuters. By contrast, exports to mainland China increased 5.6%, while shipments to Hong Kong surged 31.1%, underscoring a shift toward regional demand. Imports grew faster than expected, adding to trade balance pressures. Analysts at Moody’s Analytics warned that higher U.S. tariffs, geopolitical frictions with China and policy uncertainty ahead of snap elections called by Prime Minister Sanae Takaichi could weigh on Japan’s export outlook despite support from a weak yen.

South Korea Growth Miss Highlights Export and Construction Strain

South Korea’s economy lost momentum at the end of 2025, underscoring mounting pressure on its export-led growth model. Gross domestic product expanded 1.5% year on year in the fourth quarter, below expectations, while output contracted 0.3% on a quarterly basis – the sharpest slowdown since late 2022, according to advance estimates from the Bank of Korea. Weak construction activity and a pullback in exports offset modest gains in consumption, with shipments falling 2.1% from the previous quarter despite strong full-year performance driven by semiconductors. Trade uncertainty remains a key risk as new U.S. tariff threats on AI chips loom under President Donald Trump, even as a prior bilateral deal eased auto tariffs. Policymakers kept rates steady to support financial stability amid a sharply weakening won.

Conclusion

Markets ended the period on a more constructive footing as geopolitical risk eased and policy signals turned less confrontational. President Donald Trump’s shift toward a negotiated framework on Greenland helped stabilize global risk sentiment, allowing U.S. equities to recover from recent volatility. In Asia, softer trade and growth data from Japan and South Korea underscored the ongoing drag from global trade uncertainty, even as structural demand for semiconductors remains supportive. Overall, the backdrop points to a market environment driven by policy clarity, selective growth themes and heightened sensitivity to geopolitical developments.

Investment Insights

• Policy clarity can quickly reprice risk: The easing of tariff threats linked to Greenland highlights how rapidly geopolitical rhetoric can swing market sentiment, reinforcing the need to actively manage exposure to policy-driven volatility tied to the Donald Trump administration.
• Asia growth remains uneven: Slower trade momentum in Japan and cooling growth in South Korea point to ongoing external demand headwinds, favoring selective positioning rather than broad-based regional exposure.
• Semiconductors are supportive but not immune: Structural AI-driven chip demand continues to underpin Asia’s export base, yet rising tariff risk and currency pressure argue for a cautious, valuation-aware approach.
• Diversification and balance matter: In a landscape shaped by geopolitics, trade policy and uneven growth, portfolios benefit from diversified allocations, with an emphasis on quality balance sheets and regions less exposed to abrupt policy shifts.