Chapter 1: What did President Trump say about tariffs at Davos?
Markets inflect as the president speaks. Beyond ruling out using force to acquire Greenland from Denmark, President Trump right now is touting his use of tariffs to disrupt the global trading system as a win-win for the world.
He's speaking now to business and political leaders gathered at the Swiss ski resort of Davos now, referring to outlines of trade deals with, for instance, Japan, South Korea and the European Union.
And these agreements raise growth and cause stock markets to boom, not only in the U.S., but virtually every country that came to make a deal. Because, as you've learned, when the United States goes up, you follow.
Those deals are outlines with final details still in flux. In fact, European Union lawmakers today froze discussions on the U.S.-EU trade deal after Trump's threats to raise tariffs on some EU countries who oppose his Greenland aspirations. Trump also just said Greenland is not about its rare minerals.
And just to get to this rare earth, you got to go through hundreds of feet of ice. That's not the reason we need it. We need it for strategic national security and international security.
Yesterday, there was a sell-off in stocks, with the Nasdaq dropping 2.4 percent, and also in the bond market, pushing the 10-year interest rate to its highest level since last summer. The average 30-year fixed-rate mortgage moved up sharply from 6.07 to 6.21 percent, using Mortgage News Daily's calculation. Guy Labat is chief fixed-income strategist at Jannie Montgomery Scott.
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Chapter 2: How are global trade deals affecting stock markets?
I think the risk is that on the margin, they choose to diversify into other government bonds a little bit. And each little bit matters. Treasury Department is issuing trillions of dollars of debt each year. And so a little bit of swing in demand can really change the cost of how the U.S. government finances itself.
In the financial world, I'm hearing more talk of what's a bit cynically dubbed a return to the sell America trade. What is that? And it sounds like you don't really see that happening on a significant scale yet.
The sell America trade is something that was probably more obvious in the stock market, particularly around the tariff announcements last April. There was a movement by lots of investors, both in the U.S. and overseas, to reduce their holdings of U.S. dollar assets and invest in things like European assets and Japanese assets and others as well. Now, has it affected the bond markets?
Briefly, but it wasn't in any sustained manner because the U.S.
Chapter 3: What impact did recent stock sell-offs have on the bond market?
bond markets did pretty well last year.
All right. So you're urging us to be a little bit careful thinking about the Greenland issue causing U.S. consumers to pay higher credit card and maybe home loan rates. I mean, it is a much more complicated world.
It is extraordinarily complicated. And really, the biggest risk, and it's still, in my view, a modest one, is about how the United States government borrows money, not about credit cards, not directly. It could affect mortgage rates. And mortgage rates, ironically, have gone up
since some of the announcements several weeks ago to try to bring them down, in large part because of this geopolitical tension.
Guy Labar, Chief Fixed Income Strategist at Jenny Montgomery Scott. Thank you so much. Thank you, David. Right now, the Dow Jones Industrial Average is up half a percent, 247 points, with Trump saying the U.S.
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Chapter 4: How is the war in Ukraine affecting European airlines?
is the only country that can guarantee Greenland's security, but that he won't take it by force. The S&P also up five-tenths percent. The Nasdaq is up three-tenths of a percent. New data show the portion of airspace where there's armed conflict below is at the highest level since World War II.
An official from the German airline Lufthansa told our partners at the BBC that Russia's war on Ukraine, for example, is adding time to flights, which means more fuel burned and higher costs. The BBC's Rick Kelsey reports.
Currently flying over the top of the world. The flight is from Tokyo to London and this route going over Alaska is common again, like it was in the 1970s when it stopped to refuel. But now it's often to avoid Russian airspace due to the Ukraine war. And this is not the only route that's changed.
Certainly, if you have 4.9% of the world of the six permanently enhanced continents territory in conflict, that's significant areas of the world where there is a decision to be made of whether it is safe to fly over those zones.
Hugo Brennan is from risk intelligence company Verisk Maplecroft, who put together the latest conflict intensity report, which maps global conflict. The report shows that areas affected by armed fighting have grown by 89% over the past five years.
Each additional minute of flight time leads to an average increase in passenger fares of US$1.50, according to aviation experts at the German Aerospace Center. The BBC has now heard from Lufthansa, one of the world's biggest flight operators, who say their long-haul journeys are growing by up to two hours and it must now continually adjust its network planning to keep its schedule stable.
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Chapter 5: What are the implications of airspace restrictions due to conflict?
But it's not only cost, it's also emissions. Dr. Victoria Ivanikova is Assistant Professor in Aviation Management at Dublin City University.
If you will look on the flight radar 2024, we can see that aircraft are flying Russian airspace, Ukrainian airspace, and there are some points with conflict in the Middle East. And the total area of closed or restricted in use airspace currently is around 18 million square kilometers.
That's almost 11 million square miles.
Which is the biggest airspace segregation since the Second World War.
Most Western airlines are now banned from flying over Russia, which pushes up the costs. Gilbert Ott runs God Save the Points, who help people get low-price airfares.
You know, an airline you could say would be less likely to make a seat available with points because there's so much more pressure to create that profitability rather than kind of break even with these changes, with these restrictions in airspace.
Figures suggest that until recently, airfares have changed little when taking into account inflation over 10 years. So you can still get deals, but the destination might be further away. I'm the BBC's Rick Kelsey for Marketplace.
And we're from APM, American Public Media.
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