Europe close: Stocks rise after Trump walks back on Greenland rhetoric

22nd Jan 2026 15:43

(Sharecast News) - European shares closed higher on Thursday as investors welcomed a sharp easing in geopolitical and trade tensions after US president Donald Trump claimed a "deal" had been reached on Greenland and withdrew threatened tariffs against European countries that had opposed his annexation plans.

The pan-European Stoxx 600 rose 1.1% to 609.32, with Germany's DAX up 1.28% at 24,876.24, France's CAC 40 gaining 0.99% to 8,148.89 and the UK's FTSE 100 managing gains of 0.12% to 10,150.05.

Patrick Munnelly at TickMill noted that "global stock markets appeared poised to extend their recent rally after president Donald Trump softened his stance on imposing tariffs on Europe, alleviating worries about a potential escalation in transatlantic trade disputes," adding that European equity futures had surged as risk appetite returned.

Markets were buoyed by what traders dubbed the return of the 'TACO' trade - shorthand for the view that 'Trump always chickens out' after markets react negatively to his threats.

Russ Mould, investment director at AJ Bell, said "Donald Trump's TACO bell has rung once again, much to the joy of financial markets," adding that the US president "has form in chickening out of his threats, and investors are pleased he confirmed no plans to use military action to take Greenland or to impose new tariffs on parts of Europe."

Speaking at the World Economic Forum in Davos on Wednesday, Trump stepped back from last week's bellicose rhetoric, saying he would not use force to take the semi-autonomous Danish territory, though he reiterated plans for a "Golden Dome" missile defence shield on the island.

He later claimed to have reached a framework agreement on Greenland after talks with NATO secretary general Mark Rutte, while withdrawing tariff threats against Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland, which had been facing levies of 10% from 1 February.

The relief rally echoed earlier episodes in which Trump's policy brinkmanship unsettled markets before being rolled back.

Mould said there were "a lot of similarities with the Liberation Day market wobble in April 2025 and now," noting that in both cases "Trump took an aggressive stance and then backed down after financial markets wobbled," adding that "the US president has a keen eye on what happens with bonds and stocks, and the last thing he wants is to be accused of destroying people's wealth."

Munnelly also pointed to a broader improvement in risk sentiment, saying that Asian markets had followed Wall Street higher and that US stock futures pointed to further gains, suggesting "the upbeat momentum could carry into the trading session."

Despite the relief rally, analysts cautioned that uncertainty remained high given the lack of detail around any agreement and questions over NATO's mandate in sovereign matters.

"By now we have grown accustomed to Trump's strategy of threatening nations with tariffs in a bid to get what he wants, but this occasion appears to have taken it a step too far," said Joshua Mahony, analyst at Scope Markets.

He warned that European leaders increasingly viewed the US as an unreliable partner under Trump, adding that while Washington continued to pressure allies, "the nations best protected from Trump's wrath appear to be those already sanctioned - Russia - and those with sufficient leverage to fight back - China."

Mould also urged caution, saying that while "the Greenland situation may have calmed down, there are still enough unanswered questions to throw caution to the wind," adding that the market move was "more about financial markets regaining balance than moving into top gear."

Economic news mixed from both sides of the Atlantic

Economic news was mixed - Norway's central bank, Norges Bank, kept its key rate at 4% for a third consecutive meeting, signalling it was in no rush to cut despite expectations for reductions later in the year.

In the US, consumer spending continued to rise into the autumn, with personal consumption expenditures increasing in October and November, while headline and core PCE inflation both edged up to 2.8% year on year in November.

Revised data meanwhile showed US GDP growth accelerated to a two-year high of 4.4% in the third quarter, while initial jobless claims ticked up modestly to 200,000, keeping labour market conditions tight.

Munnelly added that improving risk appetite had weighed on traditional safe havens, noting that "gold dipped 0.2% as appetite for riskier investments grew," although Mould observed it was "notable there wasn't a major sell-off in the metal," suggesting investors were "keen to keep some safety elements in their portfolio."

In the UK, retail sales remained weak but showed signs of stabilisation, according to a Confederation of British Industry survey, while government borrowing fell sharply in December to £11.6bn, offering some relief to the Treasury.

Munnelly highlighted that year-to-date public sector net borrowing had reached £140.2bn, already above the revised full-year target, but said cash measures painted a "slightly more positive outlook," reducing the immediate risk of an increase in gilt issuance at the Spring Statement.

Consumer sentiment surveys pointed to cautious optimism about the wider economy, even as spending expectations softened after Christmas amid persistent inflation pressures.

Computacenter, Telenor in the green as defence stocks slip

In equities, Computacenter surged after a positive trading update, while Norway's Telenor jumped after agreeing to sell its stake in Thailand's True Corporation for about NOK 39bn.

Volkswagen traded higher after reporting a roughly 20% year-on-year rise in net cash flow, aided by improving sentiment around tariffs, with Munnelly noting that the company had delivered "stronger-than-expected net cash flow projections for 2025."

On the downside, defence stocks including Leonardo, Babcock International, Rheinmetall, Saab and Hensoldt fell as the immediate risk of military confrontation receded.

Shares in Ubisoft slumped after the Assassin's Creed maker announced a major organisational overhaul, including studio closures and the cancellation of six games.

Reporting by Josh White for Sharecast.com.