Global stock markets experienced notable gains on Thursday, driven by a significant shift in U.S. trade and tariff policy alongside favorable economic performance data. President Donald Trump withdrew his previous threats to impose new tariffs on several European countries and agreed upon a framework deal concerning Greenland. These announcements helped alleviate investor anxiety and contributed to positive momentum across major markets.
Stock indices worldwide climbed with Wall Street rising up to 0.8%, the Russell 2000 reaching new highs, and European markets enjoying their best session in two months. Asian and South American markets also posted strong results, with Japan’s Nikkei increasing by 1.7% and Brazil’s Bovespa rising 2% to a fresh peak.
Sectors within the S&P 500 largely shared in these gains, with seven sectors appreciating while four declined. The communications services sector advanced by 1.6%, though real estate lagged behind with a 1.1% decrease. Notable stock performances included Meta Platforms surging 5.5%, whereas General Electric fell by 7.4%.
Among currencies, the U.S. dollar index fell by 0.5%, while the Australian dollar, New Zealand dollar, Swedish krona, and Norwegian krone each gained approximately 1% against the greenback. U.S. Treasury yields rose modestly by 1 to 3 basis points, contrasting with a roughly 5 basis point decline in Japanese government bond yields, indicating some retracement in previous selloffs.
In commodity markets, oil prices dropped around 2%, yet precious metals posted strong rallies. Gold reached a record level exceeding $4,900 per ounce. Silver and platinum climbed by 3% and 6%, respectively.
The reversal by President Trump on Greenland and tariff threats appeared partially motivated by negative market reactions earlier in the week when U.S. stocks, Treasury prices, and the dollar declined sharply together. With mid-term elections approaching, minimizing an affordability crisis on mortgage rates—currently above 6% for over half of existing loans—is a priority for the administration. This move reflects a pattern often observed where contested policies face swift adjustments following adverse market responses.
Despite ongoing concerns around trade tensions, inflation, and global political uncertainties, U.S. economic growth continues to impress. Revisions released Thursday elevated third-quarter gross domestic product (GDP) to an annualized 4.4%, the fastest pace since two years ago and an increase from the prior estimate of 3.8% in the second quarter. Early indications for the fourth quarter are even stronger, with the Atlanta Federal Reserve’s GDPNow model projecting growth of 5.4%. Such data reinforce viewpoints that both growth and inflation risks may be tilted upward, raising questions about the Federal Reserve’s approach to interest rates amid these developments.
Attention also turns to the Bank of Japan’s forthcoming policy announcement, scheduled for Friday. The central bank faces a challenging environment with the yen near historic lows, a significant selloff in government bonds, surging long-term yields, and a government pushing to boost fiscal spending. Aggressive tightening by the BOJ risks destabilizing the bond market, yet insufficient measures may not support the currency effectively. Market expectations currently include a possible 25 basis point rate hike by July and only minor further increases thereafter, suggesting the difficulty the bank faces in balancing these pressures.
Looking ahead, several events hold potential to influence markets, including the World Economic Forum in Davos featuring speakers such as IMF Managing Director Kristalina Georgieva and ECB President Christine Lagarde. Additionally, Japan’s interest rate decision, inflation figures for December, January’s flash Purchasing Managers’ Index (PMI) data from multiple regions, retail sales from the UK and Canada, and commentary from the Bank of England’s Megan Greene are anticipated. U.S. consumer inflation expectations, as measured by the University of Michigan, will provide further insights into economic sentiment.