The FTSE 100 index managed to close in positive territory on Wednesday, shrugging off early weakness, as remarks from US President Donald Trump regarding Greenland provided some reassurance to investors. The blue-chip index finished up 11.31 points, or 0.1%, at 10,138.09.
Trump's Davos Address Calms Immediate Fears
In a wide-ranging and often rambling speech delivered at the World Economic Forum in Davos, Switzerland, President Trump addressed the ongoing speculation about US intentions towards Greenland. "We probably won't get anything unless I decide to use excessive strength and force where we would be, frankly, unstoppable, but I won't do that," the President stated.
However, he renewed his push for Washington to acquire the autonomous Danish territory, demanding "immediate" negotiations. "It's the US alone that can protect this giant mass of land, this giant piece of ice, develop it and improve it," Mr Trump told assembled world leaders.
Market Reaction to Geopolitical Rhetoric
Kathleen Brooks, research director at XTB, identified two key takeaways for financial markets from the President's address. "Firstly, Trump will not take Greenland by force and second, Trump wants the economy to run hot to send US stocks flying north," she commented.
Ms Brooks added, "Greenland could still be an issue for financial markets, since Trump has said that he wants to gain control of Greenland and will start immediate negotiations to do so. However, today's speech suggests that Nato is not under immediate threat, for now."
The FTSE 250 mid-cap index outperformed, closing 113.42 points higher, a gain of 0.5%, at 23,071.29. The AIM All-Share index also advanced, finishing up 7.45 points, or 0.9%, at 808.59.
UK Inflation Surprise Dismissed as a 'Blip'
Meanwhile, official data revealed an unexpected acceleration in UK inflation for December. The headline Consumer Prices Index (CPI) rose by 3.4% year-on-year, up from 3.2% in November and ahead of economist forecasts for 3.3%. This marked the first increase in the headline rate since July.
The Office for National Statistics (ONS) reported that alcohol, tobacco, and transport costs made the largest upward contributions to the monthly change. Core CPI, which excludes volatile energy, food, alcohol, and tobacco prices, remained unchanged at 3.2%, slightly better than expectations.
Analysts Downplay Inflation Concerns
Financial analysts were quick to play down the significance of the rise, characterising it as a temporary fluctuation. Analysts at Lloyds Bank attributed the increase to specific one-off factors.
"It was always likely that the December figures would post a rebound on account of the rise in tobacco duty rates showing up in the December data rather than November," they explained. "Some unwinding of the 'early' Black Friday discounting seen in the November data also looks to have been behind the upward move, as well as base effects associated with a sharp rise in airfares."
RBC Capital Markets expects the December "blip" to fall away sharply in the first half of 2026. Deutsche Bank forecasts that inflation will take a significant step down in January, moving closer to 3%, and expects the Bank of England's 2% target "to be in sight" by spring.
Broader Market Movements and Corporate News
In European equity markets, performance was mixed. The French CAC 40 closed up 0.1%, while Germany's DAX 40 ended the session 0.6% lower. Across the Atlantic, US markets were stronger at the London close, with the Dow Jones and S&P 500 both up 0.9%, and the Nasdaq Composite climbing 1.0%.
Bond markets stabilised after sharp moves on Tuesday. The yield on the benchmark US 10-year Treasury note was quoted at 4.27%, slightly trimmed from 4.28%.
On the FTSE 100, corporate updates drove significant share price movements. Luxury fashion house Burberry surged 5.0% after reporting an increase in comparable store sales over the festive period and guiding for annual profit in line with estimates. Miner Rio Tinto jumped 5.2% following a well-received production update, while Glencore, which Rio is attempting to acquire, rose 3.7%.
On the downside, credit data firm Experian slipped 4.9% despite reporting in-line trading, and insurer Admiral Group fell 4.2% after a downgrade by Goldman Sachs.
On the FTSE 250, electrical retailer Currys sparked 7.7% higher after raising profit guidance, and Premier Foods climbed 7.1%. However, pub chain JD Wetherspoon fell 8.1% as it warned that higher costs were offsetting sales growth.
In commodities, Brent crude oil traded slightly lower at $64.82 a barrel. Gold continued its record-breaking run, quoted at $4,833.66 an ounce.
The pound was quoted lower at $1.3437 at the London equities close, compared to $1.3462 on Tuesday.
Political Standoff Over Greenland
The geopolitical backdrop saw UK Prime Minister Sir Keir Starmer telling Parliament he would not yield to pressure from President Trump over Greenland's future. "I will not yield, Britain will not yield on our principles and values about the future of Greenland under threats of tariffs, and that is my clear position," Sir Keir told MPs. He added that he would host Danish Prime Minister Mette Frederiksen in London on Thursday. President Trump has previously threatened tariffs on Britain and other European nations for opposing his claims on Greenland.
Looking ahead, Thursday's economic calendar features UK public sector net borrowing figures, US GDP data, initial jobless claims, and personal consumption expenditures data. The UK corporate diary includes trading statements from discount retailer B&M European Value Retail and investment platform AJ Bell.
