Hand-drawn Candlestick Chart? One Trump Sentence Reverses Global Markets

Original Article Title: "TACO Redux: US Stock Market Rebounds, Crypto Market Continues to Languish"

Original Source: Deep Tide Techflow

A single sentence changes the market.

On January 21, just as global investors were still digesting the "Greenland Crisis" and the Danish pension fund's "US Sell-Off" shock, Trump suddenly announced: the cancellation of new tariffs on eight European countries and claimed to have reached a "framework" agreement on Greenland and even the entire Arctic region.

The market immediately switched from panic to euphoria. The Dow soared 1.21% to 49,077 points, the S&P 500 rose 1.16% to 6,875 points, and the Nasdaq climbed 1.18% to 23,224 points. All three major indices regained their lost ground from the previous day.

TACO Redux: Panic-Recovery Completed within 24 Hours

This is a typical "TACO" (Trump Announcement Causes Overreaction) market, where Trump's words trigger an overreaction in the market, followed by a rapid reversal with another statement.

Just 24 hours earlier, the market was still reeling from Trump's threat to impose a 10% tariff on Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland. The EU was preparing €930 billion in retaliatory measures, Danish pension funds announced the sell-off of US bonds, and global capital was frantically fleeing US dollar assets. The S&P 500 recorded a single-day plunge of 2.06%, the largest drop since October last year.

But on the eve of the Davos Economic Forum, Trump suddenly softened his stance and announced the cancellation of the tariff threats. Although he still emphasized the "vital importance of Greenland to US national security," his language shifted from "not ruling out force" to "resolved through a framework agreement."

Wall Street's interpretation was simple: this was a carefully orchestrated pressure play, the objective had been achieved, and now it was time to close the deal.

Goldman Sachs strategists stated, "The market underestimated Trump's negotiating flexibility, and the tariff threat was more of a bargaining chip."

Chip Stocks Strong Rebound, US Bond Yields Slightly Retreat

Individual stock performance confirmed the resurgence of risk appetite, with chip stocks particularly strong.

NVIDIA rose nearly 3%, recovering from over a 4% drop the previous day. The chip giant, which plummeted due to market panic the day before, quickly rebounded after the easing of geopolitical risks, demonstrating that institutional funds' long-term confidence in AI computational power demand remained unchanged.

Ant Group surged nearly 4%, leading the Dow. The Big Tech Seven Index rose by 0.98%, Tesla rose by almost 3%, and Google rose by nearly 2%.

Chinese concept stocks also rebounded collectively, with Baidu rising over 8% to lead the gains, and Ctrip rising by nearly 7%. Chinese concept stocks, which suffered a sharp decline the previous day, quickly recovered after risk aversion subsided.

The bond market's response was relatively muted. The yield on the 10-year U.S. Treasury note fell 1 basis point to 4.28%, a slight retreat from the previous day's high of 4.29% but still in a high range since September last year.

A more critical signal came from Japan. The yield on Japan's 10-year government bond fell by 5 basis points to 2.32%, and the 40-year yield fell by 6 basis points. After reaching a historic level of 4%, there was a technical rebound. Japan's Finance Minister, Aiko Shimajiri, called on investors to "stay calm," emphasizing a "responsible and sustainable" fiscal policy.

However, the market was not entirely buying into this statement. A Zheshang Securities analyst pointed out that the brief stabilization of Japanese bonds eased global long bond pressures, but this was more like an oversold rebound, and the fundamental contradiction of fiscal sustainability remains unresolved.

The U.S. dollar index rebounded slightly, but the strength of the euro and Nordic currencies has not fully reversed, indicating that market doubts about the U.S. dollar's creditworthiness are still simmering.

Of note, the Danish pension fund AkademikerPension has not changed its decision due to Trump's softened stance. The fund still plans to liquidate all U.S. bonds by the end of January. This means that European institutional investors' doubts about U.S. credit have shifted from emotional to structural adjustment.

Gold Surges then Retreats, But the Trend Remains

Gold prices experienced intense volatility on the 21st. Intraday, it briefly exceeded $4800, reaching a historic high, but as Trump withdrew tariff threats, safe-haven funds swiftly exited, causing the gold price to fall back to around $4650.

COMEX gold futures closed lower, but the daily range exceeded $150, showing extreme market sensitivity.

Despite the short-term pullback, institutions' medium- to long-term bullish logic for gold remains unchanged. Aakash Doshi, Head of Gold Strategy at Dhow Investments, stated: "The overall trend remains solid, and the possibility of gold breaking $5000 per ounce in 2026 is no longer distant."

The Polish central bank has approved a plan to purchase 150 tons of gold, increasing the total reserves to 700 tons. A report from China International Bank stated that after gold prices surged by 67% last year, with a further 6% increase since the beginning of this year, the expected gold buying demand from central banks and insurance companies worldwide will continue to support gold prices.

Crypto Market Continues to Struggle

Bitcoin saw a slight recovery supported by a rebound in the stock market, but it is still fluctuating in the $89,000-$90,000 range, failing to hold above the $90,000 mark. Major coins like Ethereum and Solana narrowed their losses, but trading volume remained light.

The weakness in the crypto market has exposed a core issue: when the US stock market falls due to geopolitical risks, Bitcoin follows suit; when the US stock market rebounds on risk mitigation, Bitcoin's rebound is weak. This "fall more, rise less" pattern has made the narratives of "digital gold" and "risk hedge tool" appear pale.

Coinglass data shows that within 24 hours, the cryptocurrency market saw $630 million in total liquidations in contracts, with 140,000 accounts being liquidated. Although much lower than the previous day, the ongoing liquidation trend indicates that leverages in the market are still being cleared.

The flow of funds into Bitcoin ETFs provides a clearer signal. Just the previous day, BlackRock's IBIT and Grayscale's GBTC both experienced significant outflows, highlighting institutional investors' cautious stance toward crypto assets.

Today's Focus

The expectation for a Fed rate cut continues to diminish. Interest rate futures indicate that the market expects a full-year 2026 rate cut of only 47 basis points, lower than the 53 basis points at the end of last year. Most economists expect the Fed to keep rates unchanged this quarter, and there may not even be a rate cut before Powell's term ends in May.

Trump's Davos Speech. Despite canceling tariffs on Europe, Trump's stance in Davos is still worth noting. The market needs clearer signals: is the Greenland issue really over, or is it just a temporary truce?

Can the Japanese bond market stabilize? After the technical rebound following the first-time breach of the 4% yield on the 40-year Japanese government bond, can it be sustained? If Japanese bonds spiral out of control again, the global long-dated bond market will face a new round of turmoil.

The financial storm sparked by Greenland has temporarily ended the first act with Trump's "tactical retreat." However, deep-rooted contradictions remain unresolved: the US fiscal deficit continues to expand, Europe's skepticism of the US dollar credit is fermenting, and the global debt bubble is becoming increasingly fragile in a high-interest-rate environment.

The market switched from panic to optimism in a day, but the drastic fluctuations in this sentiment itself are a risk signal. Behind the TACO market sentiment is the continued torment of market uncertainty.

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