Key Points

• U.S. equities stabilize on easing geopolitics: Relief around a Greenland deal framework helped U.S. stocks extend a rebound, with broader participation across sectors even as rate-sensitive assets and gold reflected lingering macro uncertainty.
• Geopolitical rifts remain fluid: President Donald Trump’s shifting stance on alliances and multilateral initiatives has kept markets sensitive to headlines, reinforcing volatility tied to trade, diplomacy and policy credibility.
• AI export policy adds uncertainty for semiconductors: Debate in Washington over allowing Nvidia to sell advanced AI chips to China highlights the tension between national security concerns and preserving U.S. technological leadership.
• Japan stays cautious ahead of elections: The Bank of Japan held rates while lifting growth forecasts, signaling policy patience as political uncertainty, rising bond yields and a weak yen shape the near-term outlook.

January Economic Calendar

U.S. Markets Steady as Tariff Fears Ease

U.S. equity futures traded near flat levels Thursday night after major indexes extended their rebound for a second session, supported by easing geopolitical tensions linked to Greenland. The Dow Jones Industrial Average rose more than 300 points on Thursday, while the S&P 500 and Nasdaq Composite gained around 0.6% and 0.9%, respectively, as investors welcomed indications from Donald Trump that planned tariffs on eight European nations would not proceed following a framework discussion with NATO.

Despite the relief rally, lingering uncertainty remains as details of the Greenland framework are unclear, and gold prices continued to hold near record highs, signaling persistent demand for safe havens. After-hours trading was more volatile, with Intel shares sliding sharply on weaker guidance, underscoring ongoing earnings sensitivity.

U.S.–Canada Relations Fray as ‘Board of Peace’ Rift Widens

Relations between the United States and Canada deteriorated further after Donald Trump withdrew Canada’s invitation to join his proposed “Board of Peace,” days after Canadian Prime Minister Mark Carney warned at the World Economic Forum against the use of tariffs and economic integration as tools of coercion. Trump said the board could eventually rival the United Nations, a scope that has unsettled several U.S. allies, while Carney has positioned Canada alongside other “middle powers” seeking to resist pressure from larger economies.

The dispute underscores rising geopolitical and trade uncertainty among close allies, reinforcing investor sensitivity to policy-driven risk and the growing role of geopolitics in shaping global economic alignments.

U.S. Lawmakers Split Over Nvidia AI Chip Sales to China

A growing divide has emerged in Washington after Donald Trump signaled support for granting licenses to Nvidia to sell advanced AI chips to China, prompting pushback from lawmakers concerned about national security risks. The House Foreign Affairs Committee advanced the proposed “AI Overwatch Act,” which would expand congressional oversight of AI chip exports and potentially block sales of Nvidia’s powerful H200 processors to Chinese firms such as Alibaba and Tencent.

Supporters of the exports argue restrictions risk ceding technological leadership to China, while critics warn the chips could strengthen China’s military and surveillance capabilities. The debate highlights intensifying U.S.–China tech tensions and adds policy uncertainty for global semiconductor markets and AI supply chains.

Bank of Japan Holds Rates as Growth Outlook Improves Ahead of Election

The Bank of Japan held its benchmark interest rate at 0.75% while upgrading its economic growth forecasts, striking a cautious tone as Japan heads into a snap election on Feb. 8. The central bank lifted its GDP growth outlook to 0.9% for fiscal 2025 and 1% for fiscal 2026, citing a gradual recovery supported by wage gains, government stimulus and accommodative financial conditions.

The decision was split, with one board member proposing a hike to 1%, underscoring emerging inflation risks even as headline inflation eased to 2.1%. Rising bond yields, fiscal expansion plans and a weakening yen remain key market concerns, leaving investors focused on how post-election policy dynamics could shape Japan’s monetary path.

Conclusion

Markets closed the week steadier but far from settled, as easing rhetoric around Greenland provided short-term relief while deeper policy uncertainties linger. Shifting signals from Donald Trump continue to drive sharp swings across equities, currencies and safe havens, underscoring how sensitive sentiment remains to geopolitical headlines.

At the same time, debates over Nvidia’s AI chip exports to China highlight the fragile balance between national security and global technology leadership. In Asia, the Bank of Japan’s cautious stance reflects the challenge of managing growth, inflation and political risk simultaneously.

Together, these dynamics point to a market environment where volatility is likely to persist, making disciplined positioning and selective risk-taking essential in the weeks ahead.

Investment Insights

• Policy relief is fragile: The temporary easing of Greenland-related tensions has reduced near-term risk premiums, but abrupt policy reversals from Donald Trump argue for disciplined risk management rather than chasing short-term rallies.
• Technology geopolitics matter: The debate over Nvidia’s AI chip exports underscores rising regulatory risk in semiconductors, favoring diversified exposure to global tech leaders over concentrated bets.
• Japan remains a balancing act: The Bank of Japan’s steady policy stance ahead of elections supports growth but keeps currency and bond volatility elevated, warranting selective positioning in Japanese assets.
• Volatility favors selectivity: With macro uncertainty still high, portfolios should emphasize quality balance sheets, pricing power and defensive diversification across regions and asset classes.