Europe bulletin: FTSE breaks 10,000, Eurozone inflation falls, Germany manufacturing slumps
Europe’s markets and politics closed the year on sharply diverging tracks.
Britain’s FTSE 100 powered to a historic milestone as geopolitics turbocharged energy and defence stocks, while the eurozone enjoyed a rare mix of falling inflation and resilient growth.
Germany’s services sector held firm, masking a deepening manufacturing slump.
Meanwhile, Greenland delivered a calm but firm rebuke to US saber-rattling, underscoring the hard limits of power politics in Europe’s northern flank.
Greenland pushes back calmly
Greenland PM Jens-Frederik Nielsen struck a measured tone on Tuesday, brushing aside immediate takeover fears while maintaining firm resolve.
Nielsen drew a sharp distinction between Greenland and Venezuela, a democratic nation with entrenched institutions versus a destabilised state.
He flatly stated that democratic norms and legal frameworks preclude any unilateral US seizure.
Yet beneath Nielsen’s calm rhetoric lies a steelier resolve: Europe rallied around Denmark, with PM Frederiksen warning that military action against a NATO ally would trigger alliance dissolution.
The subtext is unmistakable: Trump’s saber-rattling, however vocal, confronts real geopolitical constraints.
FTSE 100 breaks 10,000
Britain’s blue-chip FTSE 100 smashed through the 10,000-point barrier on Tuesday, posting a record high of 10,057 points on the back of surging energy and defence stocks.
The catalyst was geopolitical; US military intervention in Venezuela triggered a scramble for energy plays and defense names.ames.
Shell and BP climbed 1.3% and 0.8% respectively as crude prices spiked on Venezuela production uncertainty.
Defence heavyweights BAE Systems, Babcock International, and Rolls-Royce each gained 1.8% to 2.4%, banking on heightened global tensions and defense spending momentum.
The broader story? The FTSE’s outperformance masks a tired old market hunting for value.
It beat the S&P 500’s 16.65% gain in 2025 with a 21% rally, capitalising on shifts away from frothy US tech valuations toward dividend-rich mining, banking, and commodities plays.
Eurozone inflation falls, growth holds
Eurozone inflation retreated sharply in December, delivering the ECB’s preferred narrative of a “soft landing” intact.
Germany’s headline rate collapsed to 2.0% from 2.6%, well below economist forecasts of 2.2%, while France eased to 0.7% and Spain to 3.0%.
The culprit: tumbling producer prices, collapsing import costs, and a stronger euro deflating foreign goods.
This disinflationary push signals eurozone-wide headline inflation could dip below 2% when full December figures arrive Wednesday.
Yet here’s the plot twist: growth remains surprisingly resilient.
PMI data showed the bloc posted its strongest quarterly expansion in over two years, with services offsetting manufacturing weakness.
The ECB reads this as near-perfection, no rate cuts needed, no hikes required. Money markets price zero probability of cuts through 2026.
Germany services hold, factories sink
Germany’s services sector ended 2025 with solid growth, logging a PMI of 52.7 in December, its slowest pace in three months but still comfortably above the 50 expansion threshold.
New business growth cooled considerably, the weakest in the current streak, though Asian demand offered modest relief.
Notably, employment rose for the third straight month, with firms trimming work backlogs at the fastest pace since September.
The headline threat: wages and input costs accelerated, squeezing margins, yet companies managed to pass costs onto customers with faster price hikes.
The real story, however, is manufacturing’s collapse.
The composite PMI sank to 51.3 from 51.5, masked by services resilience. Germany’s factories plunged to 47.0 in December, a ten-month low, as export orders cratered.
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