European markets steadied after Donald Trump abruptly shelved threatened “Greenland tariffs,” lifting the FTSE 100 and broader Stoxx 600 as investors rotated back toward risk.
In the UK, Vanguard undercut Labour’s domestic-investment push by cutting “home bias” across its LifeStrategy range despite fee reductions.
Meanwhile, fresh data shows Europe still piled into US Treasuries through 2025, even as political pressure to divest grows.
Germany, for its part, escalated tensions with Moscow by expelling a Russian diplomat over an alleged GRU-linked espionage plot.
London stocks rise as Trump shelves Greenland tariffs
The FTSE 100 edged 0.7% higher on Thursday after Donald Trump scrapped his threatened 10% tariffs on eight European nations, including the UK, eliminating a key source of market anxiety that had rattled traders since Monday.
Trump claimed a preliminary “framework” agreement on Greenland’s future, though details remain sparse as Denmark has explicitly ruled out ceding sovereignty.
The concession sparked broader gains across European bourses, with the Stoxx 600 up 1.2% and sentiment shifting from risk-off to cautious optimism.
Computacenter surged 10.2% on upbeat guidance, offsetting energy stocks’ 1% decline as crude slipped. Investors now await US GDP and consumer spending data to assess Fed policy implications.
Vanguard snubs UK investment drive
Vanguard dealt a blow to Labour’s ambitions to boost domestic investment on Thursday, announcing it would slash UK exposure across its £52 billion ($70 billion) LifeStrategy fund range from late March.
The fund giant will reduce “home bias” to 20% from 25% for equities and from 35% to 20% for fixed income, estimated to translate roughly £1.9 billion in retreating UK holdings.
The move, while framed as responding to investor demand for global diversification, directly contradicts government pressure on asset managers to channel capital into British markets.
Vanguard sweetened the pill by cutting fees to 0.20% from 0.22%, effective late January.
The rebalancing underscores the tension between UK policy objectives and fund managers’ fiduciary duty to optimize returns.
Europe’s treasury gambit
Despite Trump’s tariff threats and theoretical calls for a “Sell America” campaign, European investors aggressively accumulated US Treasuries throughout 2025, accounting for 80% of all foreign buying from April to November, Citi data reveals.
Europe poured roughly €240 billion into US government debt during this period, reaching record November holdings.
Yet cracks emerged this week: Swedish pension fund Alecta dumped most of its Treasury holdings, while Denmark’s AkademikerPension announced plans to liquidate its position by month-end, citing credit risk concerns.
Trump swiftly warned of “big retaliation” if Europe divests, while Treasury Secretary Bessent dismissed the threat as “irrelevant.”
The data suggests European institutions prioritized yield and safe-haven demand over geopolitical posturing, but rising political pressure may test that calculus.
Germany expels Russian diplomat over Ukraine espionage plot
Germany expelled a Russian diplomat Thursday and summoned Moscow’s ambassador, escalating Cold War-style tensions after arresting a German-Ukrainian woman accused of funneling classified defense intelligence to her GRU handler at the Russian embassy.
Prosecutors say Ilona W. exploited contacts within the defense ministry since November 2023 to gather sensitive data on arms shipments, drone testing locations, and planned military deliveries to Ukraine.
Her alleged handler, identified as Andrei M. and serving officially as deputy military attaché, received the information under false pretenses through political gatherings.
Berlin gave him 72 hours to leave and stressed zero tolerance for espionage under diplomatic cover.
Germany’s Foreign Ministry condemned the operation as “hostile,” signaling a hardened resolve against Russian intelligence operations.
Two retired German military officials are also under investigation for potentially providing classified material.
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