A relief rally has washed over European stock markets after Donald Trump rowed back on his threat of additional tariffs on countries across the continent.

The US president said he and Nato chief Mark Rutte had agreed the “framework of a future deal” for security in Greenland on Wednesday evening.

US stock markets rallied overnight on the back of the announcement, with the S&P 500 and Dow Jones indexes closing about 1.2% higher.

The happier sentiment helped send European shares higher on Thursday morning.

In the UK, the FTSE 100 was climbing by about 0.8% in early trading.

Other European indexes were making bigger gains, with Germany’s Dax and France’s Cac 40 both up about 1.2%.

The FTSE 100 had edged higher in late afternoon trading on Wednesday after Mr Trump said he would not use force to take control of Greenland during a speech at the World Economic Forum in Davos.

The news that he had met with the Nato secretary-general and was rowing back on his tariff threats came later in the evening, after European markets had closed.

He had previously threatened eight Nato countries, including the UK, with new 10% tariffs as a result of their opposition to his ambitions to annex the mineral-rich territory.

But after what he described as a “very productive meeting” with Mr Rutte in Davos, Mr Trump suggested he had reconsidered.

It marks a turbulent week for the world’s financial markets, which have been frequently rocked by the words of Mr Trump and worries about rising global tensions.