By George Devo
Markets have rallied following US president Donald Trump’s Davos speech, in which he climbed down from threats to impose tariffs on major European allies.
The Dow Jones closed 1.21% higher yesterday, while the Stoxx Europe 600 and the FTSE rose by 1.11% and 0.79% respectively.
President Trump made the comments at the World Economic Forum’s conference in Davos, Switzerland, calming markets with claims that a framework of a deal for Greenland’s future had been negotiated.
He further reassured investors by ruling out the use of force in taking control of Greenland.
“The relatively light sell-off that came with the initial announcement on tariffs suggests investors were already sceptical about the prospects for economic or military escalation, and so far, the unified response by Denmark’s European allies looks to have had the desired effect,” Derren Nathan, head of equity research at Hargreaves Lansdown, said.
“But the hectic nature of today’s geopolitical theatre means further market shocks can’t be ruled out, and the president’s Davos speech today could move markets in either direction.”
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Chris Beauchamp, chief market analyst at IG, added: “The Greenland crisis seems about to disappear as quickly as it appeared following Trump’s announcement of a ‘deal’ last night.
“Investors should be careful – like all Trump’s agreements, the actual details are scant at best, but combined with a promise not to use force to acquire the island, the news has generated a solid rebound for stock markets.
“In a mid-term year that looks tough at best for Republicans, it seems the administration’s tolerance for market losses is even more limited than it was last year.”