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Trump: I won't use force

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Gold retreats from record peak, euro slides below $1.17

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European equity futures rise 1%; S. Korea Kospi breaks

5,000

By Tom Westbrook

SINGAPORE, Jan 22 (Reuters) - The dollar was higher,

gold softer and stocks on the rebound on Thursday after U.S.

President Donald Trump dropped tariff threats and ruled out

seizing Greenland from an ally by force.

"I won't do that," Trump said. "Okay? Now everyone's saying

'oh, good' that's probably the ‌biggest statement I made because

people thought I would use force. I don't have to use force, I

don't want to use force, I won't use force."

Wall Street ​indexes jagged higher on those words, and the

S&P 500 closed overnight notching a 1.16% rise, its

largest in two ‍months, and European futures rose 1.3%

in the Asia morning.

A bouncing dollar has pushed the ⁠euro back under

$1.17, to $1.1676, and ⁠gold has dropped about $100 an

ounce to $4,790 from a record high of $4,887. Equity benchmarks

in Australia and Japan rose around 1% and in

Seoul the Kospi crossed ‌5,000 points for the first time.

"The TACO, as they call it, ​is certainly real," said Damian

Rooney, director of institutional sales at Argonaut, a

resources-focused broker in Perth, referring to a Wall Street

acronym for "Trump Always Chickens Out".

Trump said after meeting with NATO Secretary General ⁠Mark

Rutte that Western Arctic allies could forge a new ‍deal over

Greenland that ​would satisfy his desire for a missile defence

system and access to critical minerals.

But there were no details. Rutte later told Fox News the

issue of whether Greenland will remain with Denmark did not come

up in ‍his conversation with Trump. And investors were wary of

completely unwinding some of the haven bets made this week.

"Our mood here is it's been fabulous fun being a gold bull

for the last year and a half," said Rooney, "and with gold you

never throw the baby out with the bathwater because (Trump)

can't help himself doing or saying some crazy things, whether

he's going to carry through or not."

The VIX index, nicknamed Wall Street's fear gauge,

sharply fell back towards baseline levels and ​U.S. Treasuries,

which ‍had been sold through the week, caught a bid.

"The market has largely removed the tail risk of a U.S.

confrontation with its NATO partners - not that conflict was

ever truly priced into the distribution, but some ​would have

hedged against the risk," said Pepperstone analyst Chris Weston.

Benchmark 10-year Treasury yields were down one

basis point in Tokyo trade to 4.24%, after falling four bps in

New York. Japanese government bonds started the day steady after

a wild week where election spending promises triggered an

historic rout in long-dated paper.

The Bank of Japan began a two-day meeting with the policy

rate seen on hold but a hawkish tone is expected to flag future

hikes.

The yen was steady at 158.24 per dollar but remained

under some pressure on crosses, with the ​Australian dollar

scaling an 18-month top of 107.04 yen.

The Aussie also hit a 15-month high of $0.6786 on the

greenback after data showed a stronger-than-expected rise in

Australian hiring and a sharp fall in the jobless rate.

Later on Thursday U.S. core PCE figures are due.

Markets have priced in two further U.S. rate ‍cuts this year.

Earnings are expected from Intel, General Electric ( GE )

, Freeport McMoRan ( FCX ) and Procter & Gamble ( PG ).