European Stocks Surge as Trump Steps Back from Tariff Threats

European equities opened higher, with investors poised to extend gains after U.S. President Donald Trump backed away from military and tariff threats against Europe, easing concerns of a renewed trade war.

The EuroStoxx 50 index added 1.2%, approaching the 6,000-point mark, while Spain’s Ibex 35 advanced 1.1% to trade above 17,600 points.

Investor appetite for risk assets returned, following a strong session in Asia where Japanese stocks climbed nearly 2% on the de-escalation of tensions. Speaking at the World Economic Forum in Davos, Trump said he would refrain from imposing tariffs on Europe and suggested a “macro” agreement on Greenland could be reached. While details remained scarce, the market interpreted the remarks as a positive signal.

“The underlying picture is bullish and constructive, but that in no way means the market has to go up in a straight line,” said Joan Cabrero, a technical analyst at elEconomista.es. “As I have been insisting, mature trends also correct, consolidate, and take breathers.”

With the prospect of a U.S.-E.U. tariff war diminishing, the stage may be set for a strong rebound. However, this outlook is tempered by performance across the Atlantic, where indices like the Nasdaq 100 and S&P 500 have yet to surpass highs set in late October, a peak that preceded an ongoing consolidation phase.

In this context, short-term pullbacks are seen as normal. The EuroStoxx 50’s recent declines brought the index back to the 5,800-point zone, a former resistance level that is now acting as a heavily tested support. Germany’s DAX experienced a similar move, returning to the 24,680-point area, the previous ceiling of its recent trading range. This action could be a “throwback”—a brief retreat before a larger upward move—provided Wall Street’s key support levels hold.

“Just as we noted that a new bullish leg required the United States to break through resistance, we must now be consistent in the other direction,” Cabrero noted. A more significant correction would likely require the Nasdaq 100 to lose its initial support at 25,000 points, something that has not yet occurred.

Investors also returned to sovereign bonds after several sessions of selling, pushing prices up and yields down in the secondary market. For a second straight day, Japanese bonds were a clear reflection of the shifting market sentiment.

Long-term Japanese government bonds stabilized after two days of heavy liquidation. The improved geopolitical environment offered relief to investors ahead of snap elections in Japan in two weeks. The yield on the 30-year Japanese bond fell 10 basis points on Thursday to 3.6%.

“The sharp drop in very long-term bond yields reflects a rebound after the after were oversold earlier in the week,” analysts at Mitsubishi UFJ Morgan Stanley Securities commented. Market participants are now looking ahead to the Bank of Japan’s meeting on Friday, where no monetary policy changes are anticipated.

Gold Prices Retreat

Gold was one of the assets to fall following Trump’s comments on Greenland. The precious metal retreated on Thursday but held above $4,800 an ounce. While the safe-haven asset typically declines as risk appetite grows, lingering geopolitical uncertainty is prompting some firms to project a higher average price for 2026.

Goldman Sachs recently raised its forecast for the year, setting its estimate at $5,400 per ounce. The investment bank said geopolitical risks are not yet fully discounted, while central bank purchases and investor demand for gold as a market hedge are expected to keep prices elevated.