London stocks were up but off earlier highs by midday on Thursday after US President Donald Trump ditched plans to impose tariffs on European nations that opposed his pursuit of Greenland, and hailed the framework of a deal on the territory.
The FTSE 100 was up 0.2% at 10,159.95.
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."
Russ Mould, investment director at AJ Bell, said: "Donald Trump's TACO bell has rung once again, much to the joy of financial markets.
"Trump has form in chickening out of his threats, and investors are pleased he confirmed no plans to use military action to take Greenland or to impose new tariffs on parts of Europe.
"Following a strong session for Wall Street last night, Asian and European markets regained their poise as investors breathed a sigh of relief over conflict de-escalation.
"There are a lot of similarities with the Liberation Day market wobble in April 2025 and now. In both situations, Trump took an aggressive stance and then backed down after financial markets wobbled. The US president has a keen eye on what happens with bonds and stocks, and the last thing he wants is to be accused of destroying people's wealth.
"The Greenland situation may have calmed down, but there are still enough unanswered questions to throw caution to the wind. It's more about financial markets regaining balance than moving into top gear.
"Gold's rally paused for breath, albeit it was notable there wasn't a major sell-off in the metal. That suggests investors are keen to keep some safety elements in their portfolio. Healthcare and tobacco stocks were also in vogue, which is normally what you would expect on a day of worry, not when markets rebound."
On home shores, figures from the Office for National Statistics showed 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."
In equity markets, Vodafone rallied 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 shot up after an upgrade to 'outperform' at BNP Paribas.
Computacenter rose as it said full-year adjusted pre-tax profit was set to be "comfortably ahead" of market expectations.
Specialist media group Future also pushed higher after it bought digital publisher SheerLuxe and its Blush Talent management agency for £39.9m in cash.
Beazley ticked higher after saying it had rejected a £7.7bn takeover offer from Zurich Financial as it "materially undervalues" the company and its longer-term prospects.
On the downside, precious metals miner Fresnillo lost its shine as gold and silver prices eased, while defence firm Babcock fell as geopolitical tensions receded.
B&M European Value Retail pared most of its earlier heavy losses to trade just a touch weaker, after it slashed full-year guidance despite an uptick in festive sales.
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.