Jan 22 (Reuters) - European shares logged their biggest daily jump in nearly two months on Thursday in investor relief that U.S. President Donald Trump dropped tariff threats on regional countries and ruled out the use of force to acquire Greenland.
The pan-European STOXX 600 climbed 1% to 608.86 points, and recovered some weekly losses after the renewed trade war tensions sparked a global selloff earlier this week.
Trump said he withdrew the tariff threat following a meeting with NATO Secretary General Mark Rutte, during which they reached the framework of a deal for Greenland's future.
While details were scant, Trump's comments were enough to spur a risk-on mode across global markets.
Construction stocks and banks led gains by 2% each.
Still, analysts cautioned against complacency and urged investors to remain wary as tariff threats become an increasingly normalized negotiating tactic.
"The hidden risk is complacency. Investors get conditioned to ignore threats because 'it'll get walked back,' until the day it doesn't get walked back," said Matthew Tuttle, CEO of Tuttle Capital Management.
Trump's latest threats against Europe, less than a year after he slapped duties on the export-dependent region, shook confidence in the transatlantic relationship. EU leaders will rethink ties with the U.S. at an emergency summit on Thursday, diplomats said.
Upbeat earnings also buoyed sentiment in the region. Volkswagen advanced 6.5% and led German stocks higher after Europe's largest carmaker reported better-than-expected net cash flow for 2025. The broader automobile sector added 2.3%.
Investors were also monitoring developments around Ukraine peace talks. Easing geopolitical tensions overall had investors selling defence stocks that fell 2%, marking their biggest single-day decline in over a month.
On the other hand, Ukraine-exposed stocks such as Austrian bank Raiffeisen gained 7% and airline Wizz Air added 9%.
"There are a lot of factors that could threaten (gains) heading into the rest of the year. One of them being how these tensions continue to unfold, another one being how the central banks adapt further to changing environments," said Daniela Hathorn, senior market analyst at Capital.com.
Among others, Swedish hygiene products maker Essity slipped 7.4% as fourth-quarter sales missed expectations.
Telenor shares climbed 7% after the Norwegian telecoms operator sold its stake in Thailand's True Corporation for 39 billion Norwegian crowns ($3.92 billion).
ArcelorMittal advanced 6.3% as talks for the disposal of its loss-making South African business resumed.
(Reporting by Niket Nishant, Avinash P and Johann M Cherian in Bengaluru; Editing by Sherry Jacob-Phillips, Shilpi Majumdar and Chris Reese)
By Niket Nishant and Avinash P
