Global stocks dropped and the dollar eased against the safe-haven yen and Swiss franc on Monday after U.S. President Donald Trump threatened additional tariffs on goods imported from European nations that oppose his planned takeover of Greenland.

Gold and silver prices jumped to new record peaks, while oil dipped on concerns about what a possible trade war between the U.S. and Europe could mean for global growth and demand.

U.S. cash equity markets are closed on Monday for Martin Luther King Jr. Day, although S&P 500 and Nasdaq futures both dropped over 1.2%.

In Europe, the STOXX 600 index fell 1.2%. Blue-chip indexes in Frankfurt, Paris and London were down 0.4% to 1.7%.

Japan’s Nikkei fell 0.7%, and MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed.

Trump said he would impose additional 10% levies from February 1 on goods imported from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Britain, rising to 25% on June 1 if no deal on Greenland was reached.

Major European Union states condemned the tariff threats as blackmail, and France proposed responding with a range of previously untested economic countermeasures. The EU and Britain had agreed trade deals with the U.S. last year.

“There is obviously a response (in financial markets) to the new tariff threats,” said George Lagarias, chief economist at Forvis Mazars.

“It’s highly likely that the White House will use the threat of tariffs consistently, even when deals have previously been agreed.”

The EU’s retaliation options include a package of its own tariffs on 93 billion euros ($108 billion) of goods imported from the U.S. that was suspended for six months in early August, and measures under an Anti-Coercion Instrument that could hit U.S. services trade or investments.

The tariff threats should also make for a fraught few days at Davos as leaders from around the world gather in Switzerland at the World Economic Forum, including a large U.S. group led by Trump.

Dollar Not Such a Safe-Haven

In currency markets, the euro recovered from a seven-week low, rising 0.4% to $1.1641.

“The market reaction that we have seen so far is more on the back of the geopolitical risk than the tariff threat,” said Tommy von Brömsen, FX strategist at Handelsbanken.

“Typically you see dollar strength in the wake of increased geopolitical risk but now we see dollar weakness as it is originating from the U.S.,” von Brömsen said, adding that the uncertainty could cause investors to diversify away from U.S. assets.

Sterling clawed its way back up to $1.3422 after initially dipping in Asian trade, while safe-haven currencies also rose. The dollar eased 0.7% to 0.7965 Swiss francs, and 0.2% to 157.88 yen.

Investors largely shrugged off an announcement from Japanese Prime Minister Sanae Takaichi to dissolve parliament on Friday ahead of a snap general election to be held on February 8, as she looks to shore up her coalition’s fragile majority.

“The Bank of Japan’s response will be critical, given PM Takaichi’s expressed preference for cooperation and softened central bank independence,” said Scotiabank chief FX strategist Shaun Osborne.

The BoJ meets on Friday and is widely expected to maintain its policy rate at 0.75% after a rate hike in December.

The dollar index, which measures the currency against six peers, was lower on Monday.

The cash U.S. Treasury market was shut, but 30-year bond futures fell 19 ticks.

Gold again proved to be a safe harbour, rising as high as $4,689 an ounce, while silver climbed to $94.08. [GOL/]

China Growth Slows

China’s blue chips were little changed after data showed annual economic growth slowed to 4.5% in the December quarter, though that still topped forecasts.

Industrial output also beat market expectations thanks to strength in exports, but disappointing retail sales underlined weak domestic demand.

Oil prices were little changed as civil unrest in Iran subsided, with the market also tracking the demand picture should the trade war over Greenland escalate. [O/R]

Brent was down just 0.1% at $64.04 a barrel, while U.S. crude was flat at $59.41.

($1 = 0.8611 euros)

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(Reporting by Samuel Indyk and Wayne Cole; Editing by Kate Mayberry, Emelia Sithole-Matarise and Mark Potter)