European Midday Briefing: Stocks and Precious Metals Rise; Traders Await U.S. Economic Data

The Trump administration is set for critical talks with Danish and Greenlandic officials on Wednesday as President Donald Trump intensifies his campaign to bring Greenland under U.S. control.

Greenland's Foreign Minister, Vivian Motzfeldt, and her Danish counterpart, Lars Lokke Rasmussen, are scheduled to meet with U.S. Vice President JD Vance and Secretary of State Marco Rubio at the White House. The meeting follows President Trump’s recent declaration that anything less than U.S. sovereignty over the Arctic island would be "unacceptable."

Trump Demands Greenland for National Security

In a social media post on Wednesday, President Trump laid out his reasoning, tying the acquisition of Greenland directly to U.S. strategic interests.

"The United States needs Greenland for the purpose of National Security. It is vital for the Golden Dome that we are building," Trump stated on Truth Social. He argued that NATO's effectiveness would be significantly enhanced with the territory in American hands. "NATO should be leading the way for us to get it... Anything less than that is unacceptable."

Trump’s renewed focus on the mineral-rich island follows a U.S. military operation in Venezuela on January 3. His long-standing interest in acquiring Greenland has now escalated into a major diplomatic issue, alarming allies in Denmark, which is responsible for Greenland's defense. Danish Prime Minister Mette Frederiksen has warned that a U.S. attack would signal the end of the NATO alliance.

U.S. officials, including Vice President JD Vance and Secretary of State Marco Rubio, are set to lead talks regarding Greenland's future.

Denmark and Greenland Present a United Front

The high-stakes meeting comes just after Greenland's Prime Minister Jens-Frederik Nielsen and Danish Prime Minister Mette Frederiksen publicly stood together against Trump’s threats.

At a joint press conference in Copenhagen on Tuesday, Nielsen was unequivocal. He stated that if the self-governing Danish territory were forced to choose between the U.S. and Denmark, "we choose Denmark."

Frederiksen acknowledged the difficulty of resisting what she called "completely unacceptable pressure" from their closest ally. "But there is much to suggest that the hardest part is still ahead of us," she added.

Greenland's Prime Minister Jens-Frederik Nielsen and Danish Prime Minister Mette Frederiksen presented a united front against U.S. pressure at a press conference in Copenhagen.

Expert Analysis: NATO's Future at Risk

Analysts warn that the diplomatic crisis could have severe consequences for the trans-Atlantic alliance.

Ian Lesser, a distinguished fellow at the think tank GMF, described the stakes for the talks as "very high," cautioning that a failure to find a resolution "does not just threaten NATO cohesion, it threatens the future existence of the Alliance as we know it."

According to Lesser, the meeting could either establish a path for a negotiated settlement—potentially involving new European defense commitments for Greenland and preferential U.S. access to its resources—or it "could end in acrimony." The prospect of a public fallout recalls a contentious meeting in February last year where Trump and Vance engaged in a shouting match with Ukrainian President Volodymyr Zelenskyy on live television.

A 'Profound Crisis' with No Easy Fix

Carl Bildt, former prime minister of Sweden, expressed skepticism about a diplomatic breakthrough on Wednesday, calling the situation "a profound crisis." He pointed to a significant development: Vice President JD Vance taking the lead in the talks from Secretary of State Marco Rubio.

"It was scheduled to be with Secretary of State Marco Rubio, who has indicated a slightly milder approach, but JD Vance has, of course, been directly insulting towards Denmark and demanding very strange things," Bildt told CNBC. "I expect a fairly hard meeting. I don't expect any resolution."

Bildt, who co-chairs the European Council on Foreign Relations, referenced Vance's "rather extraordinary" analysis of Europe at the Munich Security Conference in February of the previous year, which he said aligned with the region's "extreme right." He concluded, "This is not the trans-Atlantic alliance we used to have."

What a 'Good Outcome' Could Look Like

Otto Svendsen, an associate fellow at the Center for Strategic and International Studies (CSIS), noted that U.S. threats have pushed Greenland and Denmark to set aside their own tensions. He said the White House meeting will reveal the administration's level of commitment to acquiring Greenland.

"A good outcome for the Danes and Greenlanders would be a statement that affirms Greenland's sovereignty and position within the Kingdom," Svendsen explained. "Anything short of that leaves the door open to continued threats and coercion."

In return for such an affirmation, Svendsen suggested the Danish and Greenlandic delegation might offer to revisit economic and security arrangements, including more favorable access for U.S. companies to Greenland's mining sector and increased Danish investment in Arctic security.

Last week, several European leaders, including the heads of France, Germany, and the United Kingdom, rallied in support of Greenland, asserting that Arctic security must be a collective effort. "Greenland belongs to its people," they wrote in a joint letter. "It is for Denmark and Greenland, and them only, to decide on matters concerning Denmark and Greenland."

A senior Bank of England policymaker has called for further cuts to UK interest rates this year, citing a predicted sharp slowdown in inflation.

Alan Taylor, an external member of the Bank's Monetary Policy Committee (MPC), believes that cooling energy prices and cost-of-living measures from Rachel Reeves's autumn budget will help steer inflation back to its 2% target by the middle of 2026.

Based on this outlook, Taylor argues that borrowing costs should be lowered. "Interest rates should continue on a downward path, that is if my outlook continues to match up with the data, as it has done over the past year," he stated.

Drivers of Disinflation Point to Lower Rates

In a speech delivered in Singapore, Taylor outlined several factors that he expects will drive UK inflation down from its current rate of 3.2% to near the 2% target by mid-2026.

He noted that the impact of tax and administered price hikes will diminish in April. Furthermore, he highlighted key disinflationary pressures:

• Budget Measures: New policies from the budget are estimated to lower inflation by 0.5 percent.

• Food and Energy: Food inflation has already fallen significantly, and energy prices have stabilized at lower levels.

Taylor, a consistent advocate for rate cuts on the MPC, sees these developments as sufficient justification for reducing the Bank Rate from its current 3.75%.

Global Trade's Surprising Impact on UK Prices

Despite risks from Donald Trump's tariff policies and rising geopolitical tensions, Taylor presented an optimistic assessment of global trade's long-term trajectory. He argued that history shows a tendency for trade barriers to eventually fall.

Looking ahead, he suggested that AI technologies and the growth of developing nations could accelerate global trade. This trend, he said, should help keep long-term inflation low, including in Britain.

Taylor pointed out that the UK has already benefited from an influx of cheaper goods due to trade diversions caused by international tariff policies, which has helped ease domestic inflationary pressures. This phenomenon has been observed recently with a surge in Chinese imports to the UK.

Policy Normalization and Market Expectations

Taylor believes the cooling inflation trend is sustainable, especially with wage growth also slowing. "I now therefore expect monetary policy to normalise at neutral sooner rather than later," he said.

City investors appear to share this view, with financial markets currently pricing in at least one additional quarter-point interest rate cut this year.

Gold and silver's record-setting performance in 2025 has accelerated into the new year, with prices continuing to climb on the back of supply pressures, rising political risk, and new questions about central bank independence.

The rally gained fresh momentum on Monday when gold prices surged past $4,600 an ounce. The move followed news that U.S. Federal Reserve Chair Jerome Powell is under criminal investigation concerning the $2.5 billion renovation of the Fed's headquarters.

By Wednesday, spot gold was trading near $4,633.46 an ounce. Silver also extended its gains, breaking through the $90 per ounce mark for the first time on Tuesday before climbing another 3.5% to trade at $90.42.

This builds on a powerful trend from the previous year. In 2025, spot gold appreciated by about 65%, while silver skyrocketed roughly 150%. The momentum has not slowed in 2026, with gold already up 7.1% and silver adding 26.6% year-to-date. According to market managers, the fundamental drivers behind this rally remain firmly in place.

Geopolitical Friction and Supply Controls

Analysts point to persistent geopolitical stress as a core pillar supporting precious metals. Daniel Casali, a partner in investment strategy at Evelyn Partners, noted that events like Russia's 2022 invasion of Ukraine and President Donald Trump’s "liberation day" tariff announcements continue to buoy gold.

"When Trump started to raise tariffs, China started to respond, so they pulled out what I would define as a battle between the U.S. and China of resource nationalism," Casali explained.

He said Beijing retaliated against U.S. tariffs by restricting exports of rare earth minerals, a move that highlighted their critical role in American defense, technology, and AI supply chains. These export controls were later expanded to include silver, a vital component for AI hardware, electric vehicles, and other industrial applications in the U.S. and Europe.

Investors are now focused on a potential meeting between Trump and Chinese President Xi in April. "How that goes? No idea," Casali said. "But you bet your bottom dollar export controls are going to be a key discussion point."

Political risk escalated further in early 2026 after the U.S. removed Venezuelan President Nicolas Maduro from power and the White House floated the idea of military action to secure control over Greenland. Casali observed that both Washington and Beijing are positioning their resources for leverage. While China controls rare earths and silver exports, the Trump administration is working to limit Venezuelan oil flows, which are primarily directed to China.

Record Price Targets Amid Shortages and Policy Risk

With these dynamics in play, some experts believe precious metals have much further to run. Ned Naylor-Leyland, an investment manager at Jupiter Asset Management, stated it was "absolutely" possible for gold to hit $5,000 and for silver to exceed $100 this year. He said investors "should assume that that would definitely happen this year" based on current conditions.

Naylor-Leyland identified silver as the market facing the most severe tightness, largely due to Beijing's export controls. "Silver is basically disappearing now to China and India, there's about a $10 premium being paid in Shanghai," he noted, adding that the market is now centered on physical bars rather than screen-based trading.

Silver’s widespread industrial use makes this shortage particularly acute. "The thing about silver is, if you don't have it, you can't build anything," Naylor-Leyland said. "Whether it's electronics or white goods or missiles or cars, you don't have it, you can't have it."

For gold, he identified accommodative monetary policy as a primary catalyst. "The base case with gold is presuming central banks remain dovish," he said. "We're in a rate cutting environment with unconventional policies and chasing down Chairman Powell. Unless they reverse course and start hiking, you can expect gold to do pretty much what it did last year or more."

Paul Syms, head of EMEA ETF fixed income and commodity product management at Invesco, agreed that the trends supporting metals appear even stronger now. He highlighted that the investigation into Powell has ignited fresh concerns over the Federal Reserve's independence, prompting a dozen global central bank heads to issue a statement in his support.

Syms concluded that with persistent worries over the U.S. dollar, budget deficits, lower interest rates, high geopolitical tension, and growing industrial demand for silver, there is no obvious catalyst that would reverse the upward trend in metal prices in the near term.

The United Arab Emirates has officially joined Pax Silica, a US-led technology bloc focused on strengthening innovation and securing supply chains for the artificial intelligence era.

The agreement was signed in Abu Dhabi on Wednesday by UAE Minister of State Saeed Alhajeri and US Undersecretary of State for Economic Affairs Jacob Helberg. The signing was part of Helberg's Middle East tour, which also includes stops in Qatar, Saudi Arabia, and Israel.

Following the agreement, Helberg invited Alhajeri to a ministerial dialogue on critical minerals scheduled for February 4 in Washington.

According to Alhajeri, the UAE’s entry into Pax Silica demonstrates the nation's commitment to its AI ambitions and the technology's power to reshape the global economy. He stated that the pact "reflects the shared commitment to shaping the future of AI with the responsibility of foresight and purpose."

Alhajeri described the move as a "defining moment for the future of human innovation," adding that AI is "no longer a technology but a lifeblood of the 21st century."

A Global Coalition for Tech Security

Pax Silica is a strategic initiative aimed at bringing together "trusted" partners to collaborate on technology. The US Embassy in the UAE had hinted at the announcement on Monday, calling the Emirates' participation "a key step in strengthening secure, resilient and innovation-driven supply chains critical to the AI era."

The UAE attended the initial Pax Silica meeting in Washington in December, alongside Japan, South Korea, Singapore, the Netherlands, the UK, Israel, and Australia. Qatar also signed the declaration on Monday, a development Helberg said "effectively fast-tracks diplomatic normalisation" by bringing Israel and Qatar into a single US-led framework.

Next, India will be invited to join the alliance next month, according to US Ambassador to India Sergio Gor.

US Perspective: A Partnership for the Future

Jacob Helberg described Pax Silica as a "real coalition of capabilities," emphasizing the strong relationship between the two nations. "The UAE is and always will be a cherished partner of the US... [we] can write the code for the next generation together," he said.

Drawing a parallel to the last century's economy, Helberg noted, "If the 20th century ran on oil and fuel, the 21st century will run on compute and the minerals that feed it."

The official Pax Silica declaration underscores this vision, stating that resilient supply chains are fundamental to the economic security of its signatories. It also acknowledges that "artificial intelligence represents a transformative force for our long-term prosperity and that trustworthy systems are essential to safeguarding our mutual security and prosperity."

UAE's Deepening Investment in AI

This partnership is the latest in a series of strategic moves by the UAE to position itself as a global leader in artificial intelligence as part of its economic diversification away from hydrocarbons.

The country's focused AI strategy has already produced significant results:

• Major Investments: The UAE has attracted partnerships and investments from top industry players, including Microsoft, Nvidia, and OpenAI.

• Infrastructure Projects: In collaboration with the US, the UAE is developing the Stargate AI campus in Abu Dhabi, which will feature 5 gigawatts of capacity for AI data centers.

• Language Models: The nation has developed its own large language models, such as Falcon Arabic, to ensure Arabic culture is represented in the global AI ecosystem.

• Dedicated University: In 2019, the UAE launched the Mohamed bin Zayed University of Artificial Intelligence (MBZUAI), a graduate-level university exclusively for AI studies.

• Government Leadership: As early as 2017, the UAE appointed Omar Al Olama as one of the world's first ministers for artificial intelligence.

Federal Reserve Chair Jerome Powell recently took the unusual step of recording a video statement to protest the Trump administration's latest actions against the central bank, a move that drew a letter of support from his global peers. Despite these high-level alarms, investors have remained remarkably calm.

Treasury markets were little changed, and stock indexes climbed to record highs to start the week. This quiet market response suggests a broad confidence that, despite the political noise, the Federal Reserve's core decision-making remains insulated from interference.

Markets Shrug Off Political Pressure

The most telling indicator of market sentiment might be inflation expectations. If investors truly believed President Donald Trump could successfully pressure the Fed into cutting interest rates against its better judgment, they would anticipate higher inflation.

However, a key bond market gauge shows long-term inflation expectations holding steady around 2.35%, a level largely unchanged since Trump's election victory in November 2024.

Fed watchers attribute this market stability to the institution's structure. Rate decisions require a majority vote from the 12-member Federal Open Market Committee (FOMC). While Trump is set to appoint a new chair, he lacks the votes to command a majority on the committee before his term ends.

The Supreme Court Case That Could Change Everything

This stability, however, could be fragile. A pivotal moment is approaching on January 21, when the Supreme Court is scheduled to hear oral arguments in Trump's effort to fire Fed board member Lisa Cook.

According to Bloomberg litigation analyst Elliott Stein, Cook has a 60% chance of winning her case to remain in her post. "The high court has indicated the Fed is distinct from other agencies and so far has let her stay in her role while the case advances, signaling a higher bar for removing a Fed governor," Stein noted.

But a loss for Cook could be a game-changer. Macro strategists at Wells Fargo, led by Michael Schumacher, warned that a successful ouster could be "the proverbial straw that broke the camel's back."

The primary concern is that a victory for the administration would set a precedent. The White House could then seek to remove other Fed board members by citing similar justifications, such as the alleged misrepresentations in mortgage application documents used in Cook's case. This would grant the executive branch significant power to reshape the Fed's board and build a compliant majority.

Potential Triggers for a Market Reaction

Beyond the Supreme Court, another potential flashpoint is an indictment of Powell himself. Jeanine Pirro, the federal attorney who issued subpoenas to the Fed, recently noted that Powell is currently the only official to have publicly used the word "indictment."

Analysts Steven Englander and John Davies of Standard Chartered argue that even a "marginally credible" indictment could finally provoke a strong investor reaction. "The dollar could come under more extended pressure," they wrote, explaining that the Fed's credibility would plummet if its governors could be removed at will, leading to expectations of easier monetary policy.

Economic Impact of Trump's Credit Card Cap Proposal

Separately, the administration's proposal to cap credit card interest rates at 10% is also under scrutiny. While seemingly a pro-consumer move, economists at Morgan Stanley, including Heather Berger, predict it would ultimately harm consumer spending.

The team calculates that lower rates could free up approximately $100 billion in consumer income. However, they expect this benefit "would be more than offset by the negative effects," primarily a reduction in credit availability.

Faced with lower profits, credit card companies would likely tighten lending standards, shrink credit lines, and issue fewer new cards. The most impacted would be consumers with the lowest credit scores, who might resort to more expensive options like buy-now, pay-later services or be forced to cut spending altogether. The Morgan Stanley team concluded that the policy would not only depress overall outlays but also "only worsen the K-shape narrative" of economic inequality.

Indian Oil Corporation (IOC), the country's largest state-run refiner, is expanding its crude oil sources by purchasing its first-ever cargo from Ecuador. This strategic move is part of a broader effort to find alternatives to Russian supplies amid mounting international pressure.

According to trade sources, IOC has secured 2 million barrels of medium-heavy sour Oriente crude from the South American nation. The cargo, purchased via a tender, is scheduled for delivery at the end of March.

Navigating Sanctions and Supply Gaps

The push for diversification comes as IOC and other Indian refiners navigate a global market reshaped by U.S. sanctions targeting major Russian producers like Rosneft and Lukoil. In response, Indian firms are actively searching for competitively priced crude from new suppliers around the world.

While IOC has committed to full compliance with U.S. sanctions, it has previously sought to secure non-sanctioned Russian oil. In October, the company reportedly bought five cargoes of Russian crude from non-sanctioned entities for delivery in December. However, the limited availability of such supplies appears insufficient to meet the refiner's needs, prompting the turn toward suppliers as distant as Ecuador.

This pivot is not an isolated event. In December, IOC also purchased its first crude cargo from Colombia through an optional supply agreement with the state oil firm Ecopetrol. These deals signal a clear trend of Indian refiners looking toward the Americas and West Africa to replace Russian volumes.

Geopolitics and the US Trade Deal

India's energy procurement strategy is closely linked to its diplomatic and economic objectives, particularly its pursuit of a trade deal with the United States. Since Russia's invasion of Ukraine in February 2022, India is estimated to have imported $168 billion worth of Russian crude oil.

The Trump Administration has identified India's significant purchases as a key source of funding for Russia's war efforts, complicating trade negotiations. To address these concerns, New Delhi is now requiring domestic refiners to provide timely and accurate weekly data on their imports of both Russian and U.S. crude.

Sources familiar with the matter indicate that the Indian government plans to use this data in its discussions with the U.S. administration, aiming to demonstrate its shifting import patterns as it works to finalize a trade agreement.