Trump withdraws tariff threat, boosting European stocks; auto stocks lead the gains, and the FTSE 600 jumps 1.1%
On January 22, European stocks clearly strengthened in Thursday morning trading, mainly because U.S. President Trump abandoned his previous trade tariff threats and instead supported the Greenland compromise plan brokered under NATO. This shift is seen by the market as an important signal of easing geopolitical risks and has also alleviated investors’ concerns about the European economic outlook.
As uncertainty recedes, the STOXX Europe 600 Index opened up 1.1%, with funds quickly flowing into sectors highly sensitive to trade conditions. Automakers became the biggest beneficiaries, with Mercedes-Benz shares soaring about 4% at one point, reflecting market optimism about the easing of transatlantic trade tensions. Against the backdrop of reduced tariff pressures, the outlook for European auto exports was re-priced, leading to a collective rebound in related stocks.
In contrast, the defense sector experienced a pullback. As military tensions eased, some defense stocks that had previously been priced with a geopolitical risk premium saw profit-taking. German Rheinmetall and Hensoldt both declined about 3.6% in early trading, indicating that funds are shifting from the “safe-haven and military industry” theme to more cyclical assets.
The sentiment in the U.S. market was also boosted. Futures tracking the S&P 500 index indicated that Wall Street was expected to rise about 0.3% at the open. The index had already rebounded late Wednesday, with a weekly gain of 1.2%. This suggests that Trump’s change in stance on tariffs not only influenced European stock movements but also provided a positive push for global risk assets.
From a longer-term perspective, Trump’s withdrawal of tariff threats and acceptance of the Greenland compromise plan provide a short-term stabilizer for transatlantic relations. For investors focused on European stock market trends, the STOXX 600 performance, and auto stocks, this policy shift may signal a warming of risk appetite. If no new trade or geopolitical shocks occur subsequently, the European market is expected to enter a relatively friendly trading window in early 2026.