Europe close: Markets mixed after Trump's Davos speech
By Josh White
Date: Wednesday 21 Jan 2026
(Sharecast News) - European shares finished mixed on Wednesday as investor attention turned to the World Economic Forum in Davos, where Donald Trump appeared to calm market nerves after weeks of heightened geopolitical tension linked to his demands over Greenland and tariff threats.
The pan-European Stoxx 600 edged up 0.01% to 602.85, with Germany's DAX falling 0.51% to 24,577.81, France's CAC 40 rising 0.08% to 8,069.17 and the UK's FTSE 100 gaining 0.11% to 10,138.09.
Dan Coatsworth, head of markets at AJ Bell, said the FTSE 100 "held up in early trading on Wednesday despite a rebound in UK inflation and continued uncertainty over Greenland," adding that "gains in the mining sector and well-received results from the retail space helped to keep the FTSE 100 afloat despite weakness in the banking sector."
Equities firmed after Trump ruled out using force to take Greenland, despite reiterating that the territory was a "core national security interest" for the United States and calling for "immediate negotiations" to acquire it.
Speaking for more than an hour in Davos, Trump insisted America had a historic right to the island and sought to reassure Nato allies, saying "I won't use force."
His remarks followed weeks of market volatility driven by fears that escalating rhetoric and tariff threats against Nato allies opposing annexation could spark a broader trade conflict.
Patrick Munnelly, market strategy partner at TickMill, noted that "market turbulence may be stabilising," with US equity index futures edging higher, although he cautioned that "global stock markets remained under pressure" after Trump's tariff announcements "further rattled investor sentiment."
Safe-haven gold retreated from recent record highs following the speech, having earlier surged as "a reminder of continuing nervousness as people fret over the future of a Nato alliance which has been a key part of the Western world's firmament in the post-war period," as Coatsworth put it.
Kathleen Brooks, research director at XTB, said Trump's comments had eased immediate fears.
"Trump's speech has lowered the geopolitical temperature somewhat, and the gold price has come back from its highs, although it remains well above $4,800 an ounce," she said.
Brooks added that the address underlined Trump's focus on markets, noting he "cares about the performance of the US stock market above all else."
Munnelly said investors were "looking to his highly anticipated Davos speech later today, hoping for a possible softening in his stance," amid speculation that Trump's posture on Greenland could be "a calculated bluff aligned with his 'Art of the Deal' methodology."
Despite the calmer tone, European leaders continued to weigh responses to the threat of higher US tariffs against eight countries backing Denmark's sovereignty over Greenland.
Signs of potential economic retaliation emerged after Danish pension fund AkademikerPension said it was selling $100m of US Treasuries, citing concerns over US government finances amid rising debt.
Munnelly said reports of a Danish pension fund contemplating withdrawing from the US Treasury market had "amplified market volatility," evoking memories of the so-called "'Sell America' trend."
UK inflation rises more than expected, manufacturing output falls
In economic news, UK inflation rose more than expected in December, with data from the Office for National Statistics showing consumer price inflation climbed to 3.4% year-on-year from 3.2% in November, above forecasts for 3.3%.
Alcohol and tobacco prices jumped 5.2% after higher excise duties took effect, while airfares and food prices also pushed inflation higher.
Including housing costs, CPIH rose to 3.6%.
Munnelly said the headline figure was "0.1 percentage points higher than market expectations," but stressed that "the modest month-to-month changes in annual rates appear to be driven largely by one-off factors."
Michael Saunders, senior adviser at Oxford Economics, said the rise reflected "fairly temporary, quite erratic factors," but warned inflation remained "relatively sticky" and well above target.
Coatsworth added that hotter-than-expected inflation "creates uncertainty around the chances of interest rate cuts when the Bank of England meets in February."
UK manufacturing data added to the cautious tone, with the latest survey from the Confederation of British Industry showing output fell again in the quarter to January.
The CBI's output balance dropped to -25 from -21, with declines across most sub-sectors and firms expecting further falls through April.
The organisation said weak demand, rising costs and squeezed margins were weighing heavily on confidence.
Housing data meanwhile showed UK house price inflation picked up to a five-month high in November, with average prices rising 2.5% year-on-year to £271,000, while rental growth eased slightly to 4.0%.
Regional disparities persisted, with the North East recording 6.8% annual growth, while London prices fell 1.2% from a year earlier.]
In the US, mortgage applications rose sharply for a second week, according to the Mortgage Bankers Association, climbing 14.1% as the 30-year mortgage rate fell to a 16-month low of 6.16%, providing some support to global risk sentiment.
Rio Tinto jumps on expectations beat, Burberry also in the green
In equities, mining heavyweight Rio Tinto jumped 5.18% after beating expectations for quarterly iron ore and copper production, helping underpin the FTSE 100.
Barry Callebaut gained 3.29% following the appointment of former Unilever boss Hein Schumacher as chief executive.
Burberry Group surged 6.07% after what Coatsworth described as an "encouraging" trading update, noting that "Chinese demand has picked up alongside gains in other parts of Asia including South Korea," although he cautioned that "many investors are still waiting on the sidelines for more evidence of the turnaround."
Pearson rose 1.07% after a positive earnings update.
Reporting by Josh White for Sharecast.com.
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