On Tuesday, Asia-Pacific markets experienced a decline as investors evaluated the implications of renewed U.S. tariff threats associated with Greenland, which heightened concerns regarding escalating trade tensions with Europe. European states are reportedly deliberating counter-tariffs and more extensive punitive economic measures in reaction to new tariff threats from President Donald Trump, which further exacerbates tensions regarding Greenland. On Saturday, Trump declared that exports from eight European nations would commence at 10% on February 1 and escalate to 25% by June 1, contingent upon the failure of negotiations aimed at establishing U.S. control over Greenland, a mineral-rich, semi-autonomous island currently governed by Denmark.

Hong Kong’s Hang Seng Index increased by 0.29% to 26,487.51, whereas mainland China’s CSI 300 decreased by 0.33% to 4,718.88, attributed to intensified regulatory scrutiny in the wake of a surge in trading activity. Authorities have taken steps to control leverage following a surge in onshore market turnover, which has reached unprecedented levels, partly due to an increase in margin trading balances to a historic peak. In light of the tightening measures, Standard Chartered’s Raymond Cheng expressed optimism regarding China A shares, pointing to a stabilizing economy and anticipated fiscal policy support during the forthcoming policy meetings in March 2026. “We view the strength of China equities as sustainable, given policy stimulus to add further upside to our projected mid-teen earnings growth for the forward 12 months,” stated the bank’s regional chief investment officer for Greater China.

Market participants are attentively monitoring the situation in Japan following Prime Minister Sanae Takaichi’s announcement on Monday regarding her intention to dissolve parliament and initiate a snap election on February 8. Japan’s Nikkei 225 experienced a decline of 1.11%, closing at 52,991.1, while the Topix fell by 0.84%, finishing at 3,625.6. South Korea’s Kospi experienced a decline of 0.39%, settling at 4,885.75 following its recent peak, whereas the small-cap Kosdaq saw an increase of 0.83%, reaching 976.37. Yields on Japan’s 40-year government bond have reached 4% for the first time. Japan’s ruling coalition maintains a slender one-seat majority in the Lower House, a situation that arose following its establishment in October, when Takaichi ascended to the role of prime minister after the resignation of her predecessor. Fitch Group noted that although the snap election may introduce immediate political uncertainty, it has the potential to yield enhanced policy clarity should a government with a more robust mandate come to power.

Fitch anticipates that government debt will stay high in the medium term; however, it is projected to decrease gradually as robust nominal GDP growth compensates for expanding fiscal deficits and increased borrowing costs. Consolidated general government debt is anticipated to decline to the mid-190% range of GDP by fiscal 2029, down from an estimated 199.5% in fiscal 2025 and a peak of 222% in fiscal 2020. Australia’s S&P/ASX 200 experienced a decline of 0.66%, closing at 8,815.9. U.S. stock futures indicated a pessimistic outlook for Wall Street as Trump escalates his discourse regarding Greenland.