• The US president says Europe will back down and go along with his plans to take Greenland. The response from the Continent was, “Sell America”.
• He also said he is ready to impose 200% tariffs on French wine and champagne.
• As expected, markets reflect the growing chaos with strong rallies in Metals and continues selloffs in Equities.

Morning Summary: As the financial elite gather in Davos, Switzerland this week for the latest World Economic Forum, the war of words between the US president and his country’s European allies continues to heat up. As the president boarded his plane (no, I don’t know if it was the gold plated one, given as a “gift” from his friends in the government of Qatar), he said a number of inflammatory things, including hitting France with 200% tariffs on its wine and champagne. In response, the unified theme coming from the continent of Europe is “Sell America”. While catchy, this is a bit misleading, for there are a lot “Americas”. Much of the world will continue to buy from South America, most notably Brazil, Mexico in Central America, and Canada in North America. Where the world will turn its collective back is on that one big block known as the United States. (It would be interesting to hear what Mr. Buffett has to say. For years he has repeated the phrase, “Buy America”.) Markets reflected the growing chaos overnight through early Tuesday morning. I received a message Monday night from a fund manager, “Shanghai silver price is over $100”. Meanwhile, the US dollar index continues to weaken and the euro strengthen. 

Equities: Global equity markets saw continued selling Tuesday in response to the heat being turned up under the rhetoric coming from the US president and response from European leaders. US stock index futures were in the red across the board, led by the March Nasdaq issue ((NQH26) with a loss of 560 points (2.2%). The March S&P issue (ESH26) was down 125 points (1.8%) while the nearby Dow Jones Industrial Average contract (YMH26) was off 837 points (1.7%). A look at global markets and we see indexes in Asia were lower across the board, with Japan’s Nikkei down 1.1%. Selling was a bit more vigorous in Europe, as one would expect, with the spotlight on France’s CAC 40, down 1.4% in early trade. I talked yesterday in this space of how the S&P 500 was showing a bearish technical pattern on its weekly chart, indicating the Index had moved into an intermediate-term downtrend. Given the US president equates stock markets with the economy, it will be interesting to see what is said and done next if global investors do indeed “sell America”. The continued pressure on stock index futures puts the spotlight on the actual indexes at Tuesday’s open, more so on this coming Friday’s close. 

Metals: As mentioned in the Opening Summary, the global silver market continues to climb higher, almost without resistance. While the Shanghai prices moved into triple digits for the first time on record, silver’s Cash Index (SIY00) hit a high of $95.50 overnight through early Tuesday morning. The March futures contract (SIH26) followed suit, posting a new all-time market high of $95.41. I’ve said it before and I’ll say it again: Silver continues to show the characteristics of both a short-supply (spike rally) and demand drive (sustained higher prices over time) market. This is unusual as we tend to see one or the other, but rarely both at the same time. In other news, Cash Index for gold (GCY00) climbed to a new high of $4,737.21, up $66.32 (1.4%) for the day. Though it may not be a key point of discussion in Davos this week, the gold market continues to be driven higher by buying from central banks around the world. In a sense, this could be the “Sell America” European leaders are talking about, something that has been going on since a bullish breakout on the Indexes monthly chart during December 2023. Since then, the Index has more than doubled in price. 

Energies: I can wrap the Energies sector up with two words: Natural Gas. Take a look at your quote screen and you’ll see the spot-month contract (NGG26) is up 67.1 cents (21.6%) from last Friday’s settlement. The Widow Maker is doing Widow Maker things again this morning. Much of the buying continues to come from US weather forecasts calling for a winter storm falling as far south as northern Texas, expected to bring with it the usual carnage from a state unable to maintain its energy infrastructure. This week’s action in natural gas takes me back to a conversation I had with a fund manager late last week. He sent me a message that read, “Natural gas, surprisingly enough, is one of the best markets when it comes to mean regression algorithms. Combined with seasonality, it will not surprise me if funds start covering their short positions in a big way”. Given the weather forecast, and seasonal tendencies, the spot-month distillates (heating oil, diesel fuel, jet fuel, etc.) contract (HOG26) has also posted a strong rally this week. Crude oil, both WTI and Brent, is following at a distance, as is RBOB gasoline.

More news from Barchart

• Is it Time to "Sell America"?
• What Drove Gold and Silver to Record Highs This Weekend?
• The AI Pick-and-Shovel Trade Hiding in Plain Sight: Stocks & ETFs to Invest in Water
• ‘It Makes No Sense To Me’: Nvidia’s Jensen Huang Slams Americans Who ‘Vilified Energy,’ Praises Trump for ‘Sticking His Neck Out’