London stocks ended just in the black on Thursday, off earlier highs as weakness in the mining and defence sectors weighed, but the mood in markets was brighter after US President Donald Trump ditched his plans for European tariffs and hailed the framework of a deal on Greenland.
The FTSE 100 closed up 0.1% at 10,150.05, underperforming European peers, with the benchmark Stoxx 600 index up 1%.
In a post on Truth Social late on Wednesday, Trump said that based on a "very productive" meeting, he and Nato Secretary General Mark Rutte have formed "the framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region".
"This solution, if consummated, will be a great one for the United States of America, and all NATO Nations," he wrote.
"Based upon this understanding, I will not be imposing the Tariffs that were scheduled to go into effect on February 1st. Additional discussions are being held concerning The Golden Dome as it pertains to Greenland."
Danni Hewson, head of financial analysis at AJ Bell, said: "It's been an odd day for markets as investors try and figure out what the recent upheaval really means for the global economy.
"Did Donald Trump really chicken out or was this another example of the US president making outlandish demands and then settling for what he really wants.
"Whilst markets have rebounded significantly today, interest in miners and defence stocks has waned and the momentum that had powered fresh records just a week ago seems to be lacking."
On home shores, figures from the Office for National Statistics showed that public sector borrowing fell in December to £11.6bn, down by £7.1bn or 38% on December 2024.
Public sector borrowing declined to £11.6bn, down by £7.1bn or 38% on December 2024. Despite the drop, it was the tenth highest December figure since monthly records began in 1993, not adjusted for inflation. Borrowing is the difference between total public sector spending and income.
Borrowing in the financial year to December was £140.4bn, down by £0.3bn or 0.2% on the same nine-month period of 2024, but still the third-highest April to December borrowing on record after those of 2020 and 2024.
ONS senior statistician Tom Davies said: "Borrowing in December was substantially down on the same month in 2024, as a result of receipts being up strongly on last year whereas spending is only modestly higher.
"However, across the first nine months of the financial year as a whole, borrowing was fractionally lower than in the same period in 2024."
Investors were also digesting a slew of US data releases, including the latest GDP figures, jobless claims and the PCE price index, which is the Federal Reserve's preferred inflation gauge.
In equity markets, Vodafone gained as Deutsche Bank lifted its price target on the stock to 150p from 140p.
AJ Bell advanced as it hailed record first-quarter platform assets under administration of £108bn.
Senior surged as it said its full-year performance would be "comfortably above" previous expectations, while Vesuvius rallied after an upgrade to 'outperform' at BNP Paribas.
Computacenter shot higher as it said full-year adjusted pre-tax profit was set to be "comfortably ahead" of market expectations.
Specialist media group Future rose after it bought digital publisher SheerLuxe and its Blush Talent management agency for £39.9m in cash.
On the downside, Admiral slumped as RBC Capital Markets downgraded the insurer to 'sector perform' from 'outperform' and slashed the price target to 3,100p from 3,600p.
Defence firms BAE Systems and Babcock also fell as geopolitical tensions eased, while heavily-weighted miners retreated, with Rio Tinto, Antofagasta, Glencore and Anglo American all lower.
Precious metals miner Fresnillo lost its shine as gold and silver prices came off highs.
B&M European Value Retail slumped after yet another profit warning. Updating on its third-quarter performance, the embattled budget chain said its seasonal ranges had sold well, with UK like-for-like sales up 3% in December and "similar trends" continuing into early January trading.
However, looking to the full-year and B&M warned it now expects adjusted EBITDA to come in between £440m and £475m, compared to its previous range of £470m to £520m.
Harbour Energy gushed lower as it reported a solid performance for 2025, but said output was expected to fall this year as a result of a managed decline in UK assets and the sale of assets in Vietnam.
Beazley was also in focus after saying it had rejected a £7.7bn takeover offer from Zurich Financial as it "materially undervalues" the company and its longer-term prospects.