European Stocks Fall as Leaders Fail to Defuse Trump Tensions

European markets continue to lose traction, as faltering relations with the US point towards a difficult path forward for Nato. Trump’s appearance in Davos tomorrow looks to be a highlight of the week, although it seems there will be plenty of meetings on the sidelines as world leaders seek to cool tensions over Greenland.

Starmer appeared to take a more conciliatory tone than many, seeking to use his apparent friendship with the President to help remedy the situation. However, Trump has since posted on social media, stating that Starmer’s decision to give up the Chagos Islands was an act of “great stupidity”. It seems Starmer’s influence may have been overplayed.

This morning brought fresh jobs data out of the UK, with the latest figures signalling an ongoing cooling trend that is becoming increasingly difficult to ignore for the BoE. With unemployment holding steady at 5.1% (up from the 4.4% seen in early 2025) the resilience of the post-pandemic jobs market appears to be fading.

This shift is most visible in the private sector, where payrolls contracted by a substantial 55,000, contributing to a full percentage point decline in non-government employment over the past year. However, this report had a greater focus on the wage growth element, with the latest private sector figure of 3.6% standing in stark contrast to the 6% seen at the beginning of 2025. While a rate cut seems unlikely in February, there is a growing likeliness that we see the bank move again in March.

Looking ahead, traders will be watching carefully for any announcement from the Supreme Court as they rule over the legality of using IEEPA to impose tariffs on trade partners across the world. Coming as Trump takes aim at a raft of European nations in a bid to buy Greenland, it leaves you wondering once again whether this would be classified as an “unusual and extraordinary threat” as required by the IEEPA.

While Scott Bessant believes it is “very unlikely” that the Supreme Court will rule against President Trump’s use of IEEPA to impose tariffs, Kalshi currently price a mere 31% chance that the court approves of its use. Nonetheless, any celebrations over a ruling against the President would likely be muted given comments from US Trade Representative Jamieson Greer who stated that the administration would begin replacing them almost immediately with other levies. Analysis provided by Joshua Mahony, Chief Markets Analyst at Scope Markets

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