On Thursday, the FTSE 100 index recorded a modest advance of 0.1% as UK equities subtly improved in tandem with broader European markets. This performance aligned with significant developments in U.S. trade policy, where President Donald Trump de-escalated his tariff stance concerning European nations in relation to Greenland. While this decision alleviated pressure on certain sectors, it also led to declines in defense stocks, reflecting investor reassessment of geopolitical and trade risks.
The British pound (GBP/USD) strengthened by 0.5%, trading at 1.3485 amid these market dynamics. In continental Europe, major indices enjoyed notable gains; Germany’s DAX rose 1.3%, with France’s CAC 40 also climbing 1%, emphasizing a broad risk-on environment across the region.
European Defense Sector Reacts to Policy Shifts
European defense stocks encountered downward pressure following President Trump's announcement that additional tariffs on European countries would be shelved. This decision emerged after constructive talks with NATO Secretary-General Mark Rutte, which the U.S. leader described as "very productive." Trump indicated that ongoing discussions might culminate in a favorable agreement benefiting both the U.S. and NATO members if successfully concluded.
Shares of key European defense firms—such as Germany’s Rheinmetall AG, Italy’s Leonardo SpA, France’s Thales, and Sweden’s SAAB AB—were among those to record losses, reacting to the removal of immediate tariff risks which had previously strained valuations.
Automotive Stocks Lead European Gains
In contrast to the defense sector, European automobile manufacturers performed robustly. Companies including Mercedes-Benz Group AG, Bayerische Motoren Werke AG (BMW), Stellantis NV, and Ferrari NV all posted gains. This uptick reflects investor optimism in the automotive industry amid easing trade tensions and positive sentiment in the European markets.
UK Corporate Earnings Update
Market participants also digested a range of corporate earnings news from UK companies, which contributed to mixed individual stock performances. Computacenter PLC reported a significant 31% year-over-year increase in gross invoiced income for 2025, notably ahead of analyst forecasts by about 14%. The IT services provider now anticipates an adjusted profit before tax of no less than £270 million, reflecting a strong operational momentum.
Senior PLC’s shares surged following an announcement that its 2025 adjusted profit before tax would exceed prior expectations comfortably, driven mainly by improved results in its Aerospace division, highlighting sector-specific strength.
Conversely, B&M European Value Retail SA experienced share declines after releasing softer-than-expected third-quarter trading figures and lowering its full-year profit outlook. UK like-for-like sales dipped by 0.6% in the quarter, although there was a marked recovery toward its end, with December achieving a 3% sales increase.
Oil and energy sector companies registered varied results; Harbour Energy PLC’s stock dropped despite a solid close to 2025, owing to its forecast of decreased production in 2026, expecting between 435,000 and 455,000 barrels of oil equivalent per day excluding specific asset sales and acquisitions.
Meanwhile, AJ Bell PLC revealed assets under administration totaling £109.6 billion by the end of 2025, surpassing consensus estimates by roughly £2 billion. The investment platform notably added 26,000 new direct-to-consumer customers in the initial quarter, representing more than twice the analyst forecast.
Beazley PLC’s shares declined following the company’s unanimous rejection of a takeover bid from Zurich Insurance Group valued at about £8.2 billion, arguing the offer significantly undervalues the company.
Key Points
- FTSE 100 edged up 0.1% amid easing U.S. tariff threats on European countries related to Greenland.
- Defense stocks declined reflecting the rollback of new tariffs, while European automotive manufacturers saw share price gains.
- Mixed corporate results from UK firms impacted sectoral performances, with strong earnings from IT and aerospace contrasting retail and energy sector headwinds.
Risks and Uncertainties
- Potential volatility in defense stocks remains dependent on ongoing NATO and U.S. trade negotiations.
- Breakeven in UK retail sales growth remains uncertain amid softened recent performances, impacting consumer staples sectors.
- Energy production forecasts indicate a possible decline, which could affect the oil and gas sector’s outlook and investor sentiment.
Disclosure: This report is based on publicly available information as of the date of publication. Market conditions and company fundamentals may change, impacting the relevance of this analysis.