Europe and defense have been written about relentlessly over the past year. And while the urgency keeps getting louder, actions are still not matching the scale of the problem.

January’s events alone, such as troop withdrawals, tariff threats, and Arctic brinkmanship, turned a slow debate about burden sharing into a real test of whether Europe can protect itself without defaulting to someone else, again.

Ultimately, Europe is not choosing strategic autonomy. It is being forced into it, faster than its institutions are designed to handle. And investors are pricing this in.

When security stops being abstract

Administration charts and staffing decisions speak louder than battlefields nowadays, especially when it comes to protectionism.

The United States began pulling a small number of officers out of NATO bodies tied to intelligence fusion, special operations planning, and maritime coordination. And though the numbers were modest, the message was not.

At the same time, European leaders committed to defense spending targets that would have sounded unrealistic a few years ago.

5% of GDP is now discussed openly, not as a distant aspiration but as something that should arrive closer to 2030 than 2035.

For context, NATO data shows that only a handful of European countries reached even 2% before the Ukraine war.

The result is a new starting point. Security is no longer an insurance policy underwritten by someone else.

It has become a line item that competes with pensions, healthcare, and debt servicing. Markets have already adjusted to this reality. Politics is still catching up.

Europe still has a dependency problem

Europe often describes its defence challenge as one of spending too little. The deeper issue is spending in the wrong way for too long.

Between 2020 and 2024, about 64% of European NATO arms imports came from the United States, according to SIPRI.

This includes aircraft, missiles, air defence systems, and the software layers that tie them together.

These are not items that can be swapped out easily, because they lock buyers into supply chains, upgrades, spare parts, and data access for decades.

Energy tells a similar story. After cutting Russian gas imports by roughly 75% between 2021 and 2025, Europe replaced that supply mainly with liquefied natural gas from the United States.

By last year, US LNG accounted for about 57% of Europe’s imports. On current contracts, that share could reach 75% by the end of the decade.

Finance completes the picture. European investors hold more than $10 trillion in US Treasury bonds. These are considered safe assets. They also tie Europe’s savings to US fiscal and political decisions in a way that is rarely discussed in public debates.

Taken together, these links mean that Europe’s exposure is not just commercial. It is operational. That difference becomes important once security turns into a negotiating tool rather than a given.

The real price of standing alone

Replacing external security support is expensive, but not in the way most people expect.

The highest costs do not sit in tanks or fighter jets, but in the systems that make armies usable.

Estimates vary, but a reasonable range suggests that accelerating defense spending to 5% of GDP by 2030 would require roughly an extra 0.6% of GDP each year across the continent.

Replacing intelligence, logistics, satellite communications, and transport capabilities adds another one to 2% of GDP during the build-up phase.

Extending credible nuclear deterrence beyond the existing national frameworks adds further pressure.

Combined, Europe could be looking at defense-related spending increases of around 3% of GDP annually through the end of the decade, on top of plans already in place.

The European Commission forecasts an aggregate EU budget deficit of about 3.3% of GDP in 2026.

However, under a more independent defense posture, that figure would move closer to 6%.

There are only three ways to fund that gap. Higher taxes reduce private demand. Larger deficits raise borrowing costs, especially for heavily indebted countries.

Central bank involvement through joint defence bonds would test long-standing rules around monetary policy. None of these paths is painless.

Investors should assume that the trade-offs will be visible in bond spreads and currency markets well before they appear in official strategies.

Why more money does not mean better defence

Even with funding, Europe faces a production problem. Military manufacturing is still organised around national preferences.

France buys French. Germany buys German. The result is low volume, high cost, and poor interoperability.

Europe produces roughly 50 main battle tanks a year. Russia produces more than 15,000.

A modern European tank costs several times more than its Russian equivalent, even allowing for differences in quality and support. This is all about scale, and Europe does not have it.

Financing is just as fragmented. Defense effort depends on fiscal capacity and threat perception.

Poland spends close to 5% of its GDP. Spain spends about 2%. Germany can mobilize hundreds of billions. France cannot. There is no shared borrowing mechanism to spread costs evenly or quickly.

Ideas to fix this exist. A coalition of willing countries could issue joint defence debt and procure at scale, focusing on air defence, drones, cyber systems, and logistics where national champions are weaker.

Such a vehicle could also create a genuine European safe asset. So far, politics has moved more slowly than markets.

Equity markets rarely wait for institutional reform. European defence stocks have risen sharply again in early 2026, extending gains that began after the Ukraine invasion.

The Stoxx Europe Aerospace and Defence index rose almost 15% in January alone. Some individual companies are up more than 30%.

Companies like Saab, Rheinmetall, and BAE Systems have been the main beneficiaries.

This rally reflects a simple belief. European defence spending is no longer a cycle.

It is a long-term commitment driven by politics, geography, and credibility.

Domestic suppliers benefit first, not because they are cheaper but because reliance now carries risk.

There are limits. Valuations assume that governments follow through, that procurement is pooled rather than fragmented, and that geopolitical pressure remains high.

Any pause in tension or delay in budgets will show up quickly in prices. The sector has moved from ignored to crowded in less than three years.

The more interesting signal lies beneath share prices. Capital markets are adjusting faster than policy frameworks.

Defence is being treated less like discretionary spending and more like infrastructure. That change in perception will outlast the current headlines, regardless of how individual disputes are resolved.

The uncomfortable truth is that Europe built its economic model on outsourced security.

Rebuilding that foundation at home will change budgets, markets, and politics in ways that are only starting to be understood.

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Wall Street staged a sharp midday rebound on Wednesday as President Donald Trump told the World Economic Forum he would not use military force to acquire Greenland.

The remarks eased the most acute worry roiling markets since his tariff threats sparked the week’s heaviest selloff on Tuesday.

The Dow Jones Industrial Average surged 337.89 points, or 0.70%, to 48,826.48, while the S&P 500 climbed 0.76% to 6,848.57 and the Nasdaq rose 0.73% to 23,122.60.​

Trump tells Davos, ‘I won’t use force’

Speaking in Davos on Wednesday morning, Trump addressed the speculation that had unnerved investors and policymakers.

People thought I would use force. I don’t have to use force. I don’t want to use force. I won’t use force.

The clarification came as a relief, as markets had been pricing in a scenario where escalating rhetoric could tip into military posturing.​

The move came after four brutal trading days.

On Tuesday alone, the Dow shed 870.74 points, or 1.76%, while the S&P 500 dipped 2.06% and the Nasdaq fell 2.39%, the worst sessions since October.

The 10-year Treasury yield had spiked above 4.29%, and the US dollar began to roll over as investors started a “flight from dollar-based assets.”

Wednesday’s remark reversed much of that damage. Yields moved lower, the dollar stabilized, and traders rushed back into equity positions.

The investors were particularly relieved that Donald Trump was very specific in his remarks.

Rather than leave open the possibility of unilateral military action, the US President closed that door entirely.

“We probably won’t get anything unless I decide to use excessive strength and force, where we would be, frankly, unstoppable. But I won’t do that,” he said.

Broader market gains remain cautious

The sectoral response revealed where confidence had cracked.

Financials and technology were the session’s main gainers, as the relief from geopolitical risk pushed traders back into cyclicals.

Intel surged over 6% after analysts raised price targets ahead of the chipmaker’s earnings.

Nvidia climbed 1.10%. Netflix, however, fell more than 2% on margin guidance disappointment.

The VIX volatility gauge, which had spiked sharply during Tuesday’s selloff, began to normalize, though it remained elevated relative to early January levels.

Traders noted that while the immediate military risk had been removed, tariff uncertainty persisted.

Trump still threatened 10% to 25% tariffs on eight European nations if negotiations over Greenland falter, leaving a layer of trade war risk in place.

The rally was real, but measured.

With earnings season ramping and Fed policy still in focus, market participants appear willing to accept whatever relief is offered.

Next week’s economic data and central bank signals may reset the narrative.

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US President Donald Trump announced Wednesday that after talks with NATO Secretary-General Mark Rutte, the US and NATO have agreed to form a framework for Arctic cooperation centered on Greenland.

In a Truth Social post on Wednesday, Trump mentioned that he will pause the 10% tariffs scheduled to take effect on February 1 on eight European nations.

Based upon a very productive meeting that I have had with the Secretary General of NATO, Mark Rutte, we have formed the framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region.

“This solution, if consummated, will be a great one for the United States of America and all NATO Nations. Based upon this understanding, I will not be imposing the Tariffs that were scheduled to go into effect on February 1st,” the US President said.

The announcement represents a tactical shift in what had been a week of escalating trade threats and geopolitical tension.

Just five days earlier, Trump had threatened 10% tariffs on Denmark, France, Germany, the UK, the Netherlands, Sweden, Finland, and Norway, rising to 25% by June 1 if they did not support his push to acquire Greenland.

What does the framework say?

The White House did not release a detailed text of the framework, only describing it as an agreement on broad Arctic cooperation principles.

However, Trump named the negotiators who will handle detailed discussions: Vice President J.D. Vance, Secretary of State Marco Rubio, Special Envoy Steve Witkoff, and “various others, as needed.”

“Additional discussions are being held concerning The Golden Dome as it pertains to Greenland. Further information will be made available as discussions progress,” Trump’s post said.

Vice President JD Vance, Secretary of State Marco Rubio, Special Envoy Steve Witkoff, and various others, as needed, will be responsible for the negotiations. They will report directly to me. Thank you for your attention to this matter!

The term “framework” is critical as it denotes a roadmap for future negotiation rather than a finalized treaty or purchase agreement.

Trump’s language, that the US and NATO have “formed the framework,” does not indicate Greenland has agreed to any change in its status.

The February 1 tariff pause suggests Trump believes he has extracted enough diplomatic concessions to justify delaying economic pressure, but talks remain actively contested.

NATO, Denmark and the EU hold fast on sovereignty

European responses were swift.

Danish Foreign Minister Lars Løkke Rasmussen acknowledged the “framework” development but reaffirmed that Trump’s “ambition remains intact.”

Rasmussen emphasized that Denmark will not abandon its red lines: Greenland’s sovereignty and the self-determination rights of its people are “totally unacceptable” to compromise.

Greenland’s Prime Minister Jens-Frederik Nielsen has been equally unequivocal.

“If we must make a choice between the USA and Denmark at this moment, we opt for Denmark. We align with NATO, the Kingdom of Denmark, and the EU,” he stated earlier this month.​

The EU’s response was to convene an extraordinary summit in Brussels on Thursday to coordinate a unified position.

The European Parliament had already suspended approval of the US-EU trade framework agreement agreed in July 2025, and the EU warned it stands ready to deploy €93 billion in retaliatory tariffs if the dispute escalates.

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Micron stock (NASDAQ: MU) jumped roughly 7% on Wednesday, driven by major Wall Street price-target hikes and a strategic $1.8 billion acquisition of a chip fabrication facility in Taiwan.

The combination gave institutional investors reason to believe the memory-chip maker has locked in years of pricing power amid surging demand in the global memory market.

Micron stock: Analyst upgrades power momentum

Micron stock is doing really well since it reported its Q1 results in mid-December.

The company posted record revenue of $13.64 billion, crushing the analyst consensus of $13.0 billion, and delivered non-GAAP earnings per share of $4.78, up 167% year-over-year.

The gross margins expanded to 56.8%, a 17% jump from the prior year, signaling peak pricing power in high-bandwidth memory (HBM).

Management’s guidance for Q2 was equally aggressive.

Micron projected Q2 revenue of $18.7 billion with gross margins of 68%, an 11% sequential jump that analyst Thomas O’Malley at Barclays called evidence of “peak scarcity.”

That clarity triggered an avalanche of price-target hikes.

Barclays raised its 12-month target to $450 from $275 on January 15, a 64% jump.

Wells Fargo lifted its target to $410 from $335 on the same day.

UBS raised to $400 from $300. Piper Sandler, KeyBanc, Cantor Fitzgerald, and RBC Capital all followed within 24 hours, with targets clustering between $425 and $450.

These aggressive moves triggered momentum buying on heavy volume.

Institutional portfolios rebalanced toward the higher price targets, and that reweighting pushed shares up sharply.

Supply tightness and fab strategy validate bullish thesis

The structural backdrop justifies the analyst’s conviction. Every AI accelerator consumes multiple stacks of HBM.

The catch: for every gigabyte of HBM produced, Micron must sacrifice three gigabits of standard DRAM capacity.

That three-to-one ratio means HBM demand acts as a giant drag on commodity memory supply, tightening the market across all segments.

Supply relief is years away. Micron’s two new fabs in Boise are not operational until 2027 and 2028. A third fab in Clay, New York, won’t start producing until 2030.

Which is why the Powerchip Taiwan fab acquisition matters strategically.

Micron announced it will acquire the P5 fabrication site in Tongluo, Miaoli County, for $1.8 billion, bringing 300,000 square feet of cleanroom space under its control.

The company expects meaningful DRAM wafer output to begin in the second half of 2027, bridging a critical supply gap.

Traders flagged this as the final piece as blowout margins, sold-out capacity through 2026, and a visible fab acquisition to prove management is serious about scaling.

That narrative confluence explains Wednesday’s 7% pop.

For now, Micron stock looks less like a cyclical chip play and more like a structural beneficiary of the AI infrastructure buildout.

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PAVmed Inc (NASDAQ: PAVM) shares more than quadrupled on Wednesday after the company’s subsidiary – Lucid Diagnostics – secured a major contract from the US government.

According to PAVM’s press release, the US Department of Veterans Affairs (VA) has joined forces with Lucid to widen access to its EsoGuard Esophageal DNA Test across the VA healthcare system.

PAVM stock, however, has reversed much of its intraday gains in recent hours and is now trading more than 45% below its 52-week high.

Why did PAVmed stock soar on Lucid Diagnostics new contract?

The VA contract represents a significant milestone for Lucid Diagnostics, and – by extension – for PAVmed stock.

EsoGuard is designed to detect esophageal precancer, a condition that’s often overlooked until it’s evolved into a more serious disorder.

By securing access across the VA healthcare system, Lucid gains a large, captive patient population and the credibility of working with one of the nation’s largest healthcare providers.

The deal could accelerate EsoGuard adoption, boost reimbursement visibility, and serve as broader validation of the company’s technology.

For PAVmed, which has struggled to gain traction, the announcement provides a rare catalyst that signals real-world demand may finally materialize. That’s why investors cheered the biotech stock today.

Here’s why PAVM shares remain unattractive to own in 2026

Beyond the headline excitement, however, PAVmed’s fundamentals narrate a much more sobering story. The company has a “history” of heavy cash burn, limited revenue, and recurring dilutions to fund operations.

Even with Lucid Diagnostics new partnership with the Veterans Affairs department, monetization will take time – and the path to profitability remains uncertain.

Additionally, valuation is another major red flag on PAVmed shares. Following a more than 300% increase on January 21st, the company’s market cap now reflects expectations far beyond its current financial reality.

PAVM may see accelerated profit-taking following this rally, especially since its near-term relative strength index (RSI) now suggests overbought conditions.  

Note that the company has dipped below its 200-day moving average (MA) again in recent hours, reinforcing that the broader downtrend remains intact.

The risk of chasing the rally in PAVmed today

Today’s explosive move in PAVM bears all the hallmarks of a meme-like surge – a “thinly” traded stock, a splashy headline, and retail traders piling in.

History shows such rallies typically end in sharp reversals once the initial euphoria fades.

Chasing momentum at inflated levels often exposes late investors to extreme volatility and potential wipeouts. Without sustained revenue growth or clear profitability, PAVmed is vulnerable to a huge correction.

For disciplined investors, the lesson is rather clear: headline-driven rallies can be seductive, but they rarely reward those who buy late.

Unless PAVmed proves it can translate contracts into meaningful earnings, the risks of chasing this rally outweigh the reward.

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Bitcoin rose alongside US equities on Wednesday after President Donald Trump said he hopes to sign market structure legislation for digital assets “very soon” during a World Economic Forum speech in Davos.

The remarks helped lift sentiment across risk assets. Data from TradingView showed daily Bitcoin gains of about 1.7% around the time of the address, while the S&P 500 was up 0.5%.

Trump signals near-term crypto legislation

In Davos, Trump said he is working to “ensure America remains the crypto capital of the world,” adding that he had signed the “landmark Genius Act” into law.

“Now, Congress is working very hard on crypto market structure legislation — Bitcoin, all of them — which I hope to sign very soon, unlocking new pathways for Americans to reach financial freedom,” he said, according to the World Economic Forum’s broadcast of the address.

Trump also told attendees he would not use force to take over Greenland and predicted that “the stock market is going to be doubled.”

He said the Dow Jones Industrial Average would “hit 50,000” and that the move would come “in a relatively short period of time.”

Market reaction and price context

Bitcoin attempted to extend a relief bounce around the Wall Street open as traders weighed the policy comments.

Earlier in January, Cointelegraph reported a roundtrip in price action that took Bitcoin back near its 2026 starting level, closing a gap in CME Group’s Bitcoin futures market and leaving gaps above the price.

Some market participants pointed to visible buy interest.

Trader CW said “$BTC has a solid buying wall,” describing the support line as strong.

Japanese bonds add a macro headwind

Elsewhere, stress in Japan’s government bond market remained a global talking point.

QCP Capital noted that after decades of near-zero rates, 10-year Japanese yields have risen to around 2.29%, the highest since 1999.

The firm highlighted structural strains, including government debt exceeding about 240% of GDP and debt servicing projected to absorb roughly a quarter of fiscal spending in 2026.

Trading resource The Kobeissi Letter said demand for Japanese government bonds was “crashing,” warning that the situation was deepening.

QCP Capital cautioned that the spillover to global bonds positions Japan as a key volatility catalyst.

What traders are watching next

Analysts are focused on whether Bitcoin can hold recent local lows and build on the bounce.

Daan Crypto Trades said it would be “good to have a bit of a wick below the yearly open” so that the level is taken out, after which traders can reassess.

For now, the policy outlook and macro backdrop appear to be pulling in opposite directions.

Signs of progress on US digital-asset rules offered a short-term lift, while rising Japanese yields and bond-market fragility kept broader risk sentiment in check.

The next phase likely hinges on follow-through in Washington and whether macro pressures ease.

If legislative momentum persists and global rate volatility stabilizes, traders say the backdrop for a more durable recovery could improve.

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The ASX 200 Index wavered after the latest Australian jobs report raised the possibility that the Reserve Bank of Australia (RBA) will hike interest rate in the next meeting. It also rose after the latest Trump TACO moment on the Greenland issue. It was trading at A$8,837, up slightly from this week’s low of $8,738.

UBS predicts RBA rate hike in February

The ASX 200 Index, which tracks the biggest companies in Australia, was in a tight range after the latest Australian jobs numbers.

A report by the Australian Bureau of Statistics (ABS) showed that the country’s labor market boomed in December. 

The economy added over 65k jobs in December after losing 65k jobs in the previous month. This surprise increase was much better than the median estimate of 30k.

Most importantly, the economy created more full-time jobs than part-time. Full-time jobs rose by 54.8k, while part-time jobs rose by 10k during the month.

The report also showed that the unemployment rate improved to 4.1% from the previous 4.3%, while the participation rate rose from 66.6% to 66.8%.

All these numbers were much better than what most analysts were expecting. Therefore, some analysts believe that the RBA will decide to hike interest rates in the upcoming meeting in February. 

In a note, analysts at UBS predicted that the Bank will move the benchmark rate to 3.85% from the current 3.60%. The money market is pricing in a 50% chance of a rate hike during the meeting.

Odds of higher interest rates have been rising after Australia published strong inflation data. The most recent data showed that the headline Consumer Price Index (CPI) remained above 3%, which is much higher than the bank’s target of 2%.

Australian dollar and bond yields jumped 

The rising odds of higher interest explains why the Australian dollar surged, with the AUD/USD exchange rate rising to 0.6800, its highest level since September 2024. It has jumped by 15% from its lowest level in April last year.

Similarly, Australian government bond yields continued rising, with the ten-year hitting 4.80% and is hovering at its highest level since October 2023. Similarly, the five-year yield rose to 4.378%.

The ASX 200 Index also rose because of the ongoing Trump Always Chickens Out (TACO) trade. TACO is a concept where Donald Trump makes an outlandish request and then retreats. 

In this case, he warned that he would impose large tariffs on several NATO members because of the Greenland issue and then changed his mind during his visit to Switzerland. In a statement, he said that he had reached a framework on Greenland, with the media reporting that the US will gain access to mineral rights. 

Australian banks were among the best gainers in the ASX 200 Index as investors anticipated higher rates for longer. Bank of Queensland stock rose by 6%, while NAB rose by 3%. CBA and Westpac banks also rose by over 2%. Other top gainers were companies like Premier Investments, IDP Education, a2 Milk Company, and Beach Energy.

ASX 200 Index technical analysis 

The daily timeframe chart shows that the ASX 200 Index held steady on Thursday after the latest Australian jobs data. It has jumped from a low of $8,376 in November to the current $8,840

The index has formed an ascending channel and is now in its middle. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA).

The most likely scenario is where the index continues rising as bulls target the next key resistance level at $9,000.  A move above that level will point to more gains, potentially to the all-time high of $9,120.

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OpenAI Chief Executive Officer Sam Altman has been meeting with major investors in the Middle East to line up funding for a massive new investment round that could total at least $50 billion, according to reports from Bloomberg and CNBC.

The discussions underscore the scale of capital OpenAI is seeking as it races to build artificial intelligence infrastructure amid intensifying global competition.

Altman recently visited the region and held talks with investors, including leading state-backed funds in Abu Dhabi, the people cited in the report said.

The talks remain at an early stage, and the final size and structure of the round could still change.

Targeting a valuation above $750 Billion

The ChatGPT maker is seeking to raise $50 billion or more at a valuation of roughly $750 billion to $830 billion, according to the report.

CNBC also confirmed that OpenAI is in discussions with sovereign wealth funds in the Middle East for the new funding round, which is expected to total around $50 billion.

The report said the round could close in the first quarter of the year, though term sheets have not yet been signed.

Bloomberg has previously reported that OpenAI also held talks with Amazon.com Inc. about raising at least $10 billion as part of its broader fundraising efforts.

The Information earlier reported that the company had discussed raising tens of billions of dollars at a $750 billion valuation.

If completed at the upper end of the range, the funding round would represent one of the largest private capital raises in history and cement OpenAI’s position among the world’s most valuable private companies.

OpenAI was most recently valued at $500 billion in the fall of 2025 in a transaction that allowed some employees to sell shares.

Capital needs driven by AI infrastructure push

OpenAI has raised billions of dollars in recent years to fund the growing costs associated with developing and deploying advanced AI systems.

These include investments in specialized chips, large-scale data centers, and highly sought-after technical talent.

The company is not yet profitable and has committed to spending more than $1.4 trillion on AI infrastructure in the coming years, according to the report.

The Middle East has emerged as a key source of capital for leading AI developers facing similar financial demands.

Companies such as Anthropic PBC and Elon Musk’s xAI have also turned to investors in the region to support their expansion.

OpenAI has previously raised money from MGX, an Abu Dhabi-based technology investment firm, and has partnered with G42 to build a large data center in the United Arab Emirates.

Competition heats up across the AI sector

Despite OpenAI’s prominence, competition in the AI sector is intensifying.

Alphabet Inc.’s Google and Anthropic are among the rivals vying for market share and investor backing.

Anthropic is also in talks to raise a large funding round at a valuation of about $350 billion, Bloomberg News has reported.

OpenAI rose to global prominence after launching ChatGPT in 2022, helping ignite the current AI boom.

Last year, the company closed a $40 billion financing round led by SoftBank, the largest private technology funding on record, with participation from Microsoft, Coatue, Altimeter, and Thrive.

In October, OpenAI also finalized a $6.6 billion share sale that boosted its valuation to $500 billion.

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Global markets steadied on Thursday as investors reacted to a sharp easing of geopolitical tensions after US President Donald Trump backed away from tariff threats and ruled out the use of force to seize Greenland.

The shift in tone lifted equities, pressured safe-haven assets such as gold, and supported the US dollar, though traders remained cautious after a volatile week driven by policy uncertainty.

Trump’s comments at the World Economic Forum in Davos and on his Truth Social platform helped calm fears of a rupture between the US and its NATO allies.

“I won’t do that,” Trump said of using force to secure Greenland. “Okay? Now everyone’s saying ‘oh, good’ that’s probably the biggest statement I made because people thought I would use force. I don’t have to use force, I don’t want to use force, I won’t use force.”

Asian markets rebound on risk relief

Asian equities broadly advanced as relief spread through markets.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose about 0.78%, while European futures were up 1% in Asia afternoon trade.

FTSE futures climbed 0.04%.

Overnight on Wall Street, the S&P 500 gained 1.16%, its largest rise in two months, with futures adding a further 0.16% in Asian hours.

The Dow Jones Industrial Average rose 1.21%, and the Nasdaq Composite advanced 1.18%.

Currency markets reflected the shift in sentiment.

The dollar firmed, pushing the euro back below $1.17 to $1.1686.

The VIX index, often referred to as Wall Street’s fear gauge, fell sharply toward baseline levels.

US Treasuries, which had been sold earlier in the week, caught a bid, with benchmark 10-year yields flat in Tokyo after falling four basis points in New York.

“The market has largely removed the tail risk of a US confrontation with its NATO partners – not that conflict was ever truly priced into the distribution, but some would have hedged against the risk,” said Pepperstone analyst Chris Weston.

Gold retreats as safe-haven demand eases

Gold and other precious metals fell as geopolitical risk premiums unwound and the stronger dollar weighed on prices.

Spot gold declined 0.8% to $4,796.75 an ounce, after hitting a record high of $4,887.82 in the prior session.

US gold futures for February delivery also lost 0.8% to $4,799.90.

“Reversal of comments by the US President was one factor that eased geopolitical tensions, and so we see a retracement in prices,” said ANZ commodity strategist Soni Kumari.

Spot silver slipped 0.1% to $93.19 an ounce, after a recent record high. Platinum dropped nearly 2% to $2,433.50, while palladium fell 0.6% to $1,829.29.

Despite the pullback, some investors remain cautious about exiting defensive positions. “Our mood here is it’s been fabulous fun being a gold bull for the last year and a half,” said Argonaut’s Damian Rooney, adding, “and with gold you never throw the baby out with the bathwater because (Trump) can’t help himself doing or saying some crazy things, whether he’s going to carry through or not.”

South Korean market hits new milestone

South Korea’s Kospi index surged past the 5,000 mark for the first time, rising nearly 2% as investors welcomed the easing of trade and geopolitical tensions.

The small-cap Kosdaq gained 1.73%.

Battery maker Samsung SDI jumped 15.28%, Doosan climbed 8.61%, and Samsung Electronics rose 3.95%.

The rally came despite weak economic data showing South Korea’s economy contracted 0.3% quarter-on-quarter in the October-to-December period, its sharpest decline since 2022.

Full-year growth slowed to 1%, the weakest since 2020.

Japan exports miss estimates, risks persist

Japan’s Nikkei 225 rose about 1.9%, snapping a five-day losing streak, while the Topix gained 0.88%.

However, economic data showed exports growth in December rose 5.1% year on year, missing Reuters estimates of 6.1%.

Exports to the US fell 11.1%, while shipments to China rose 5.6% and exports to Hong Kong surged 31.1%.

For the full year, Japan’s exports grew 3.1%, down from 6.2% in 2024. “Although shipments are holding up for now, the outlook is fraught with risks,” said Stefan Angrick, head of Japan at Moody’s Analytics, citing higher US import levies, competition, and rising trade tensions with China.

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Goldman Sachs has revised its year-end 2026 gold price projection upwards, increasing the forecast to $5,400 per ounce from the previous $4,900/oz. 

This adjustment is attributed to the ongoing trend of private-sector and emerging market central banks diversifying their reserves into gold.

Gold prices on COMEX had hit a fresh record high of $4,890 per ounce on Wednesday due to increasing safe-haven demand amid ongoing geopolitical tensions around the world. 

Central bank purchases and ETFs

The safe-haven metal’s rally has been blistering, with a 70% surge last year. This momentum has continued into 2026, with the metal climbing over 11% so far in 2026.

“We assume private sector diversification buyers, whose purchases hedge global policy risks and have driven the upside surprise to our price forecast, don’t liquidate their gold holdings in 2026, effectively lifting the starting point of our price forecast,” the brokerage was quoted as saying in a Reuters report.

Additionally, western ETF holdings are projected to increase, according to Goldman Sachs, a rise they attribute to the likelihood of the US Federal Reserve implementing a 50-basis-point cut to the funds rate in 2026.

Emerging market central banks are anticipated to continue diversifying their reserves into gold, leading Goldman Sachs to project an average central bank buying of 60 tonnes in 2026.

Goldman Sachs suggests that gold prices could face a downside risk if a significant decrease in perceived risks regarding the long-term direction of global monetary policy prompts the liquidation of macro policy hedges.

Citing increased safe-haven demand, Commerzbank AG also raised its gold price forecast last week to $4,900 by year-end.

Gold slips on Thursday

The price of gold retreated from its record high of $4,890 to trade near $4,790 during the early Asian session on Thursday, trimming earlier gains. 

This pullback followed US President Donald Trump’s decision to withdraw the European tariff threat and the announcement of a framework agreement regarding Greenland.

On Wednesday, Bloomberg reported that Trump would not impose tariffs on goods from European countries that opposed his attempt to acquire Greenland.

A future deal concerning Greenland, with a framework established by the US and the North Atlantic Treaty Organization (NATO), was also mentioned by Trump.

“Hopes for a solution in Trump’s ambitions for Greenland that would avoid tariffs could undermine traditional safe-haven assets such as Gold in the near term,” Lallalit Srijandorn, editor at FXStreet, said in a report. 

Trump did not, however, elaborate on the specifics of the alleged “framework,” leaving the exact nature of the agreement ambiguous. 

Following Trump’s retraction of threats to use tariffs as leverage to acquire Greenland, German Finance Minister Lars Klingbeil cautioned against undue optimism. 

Bull market remains strong

Any indication of heightened tensions between the US and the EU could potentially drive up the price of the yellow metal.

Although gold’s price movement may currently be slowing, the bull market remains strong, according to Ewa Manthey, commodities strategist at ING Group. 

Manthey noted that expectations of interest rate cuts, ongoing geopolitical instability, and robust central-bank purchases all contribute to a firm upside risk for the commodity.

Meanwhile, investor concerns regarding the independence of the central bank were heightened by the Trump administration’s repeated criticisms of the Federal Reserve. This volatility, in turn, strengthened the “debasement trade.”

Manthey added: 

Investors are favouring gold and silver over currencies and government bonds amid rising US debt levels and heightened policy unpredictability.

Key US economic data expected later on Thursday, which traders are anticipating, includes the final third-quarter GDP reading, the weekly initial jobless claims, and the personal consumption expenditures (PCE) price index.

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