Brexit deal anticipation fuels stocks and sterling

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© Reuters. People wearing protective face masks looking at a stock exchange card outside a Tokyo brokerage

By Tommy Wilkes

LONDON (Reuters) – Stocks rose and the British pound rose on Thursday as Britain and the EU closed a free trade agreement and investors pledged a global economic recovery.

Britain and the EU hammered out the final details of a tight trade deal after Brexit on Thursday with an announcement expected soon, contributing to an optimistic mood in the last trade session before the Christmas holidays.

While a last-minute deal has long been expected, it will finally remove an opportunity for a no-deal result 4-1 / 2 years after Britain voted to leave the trading bloc.

Initial gains jumped, but the more domestic-focused British mid-cap hit its highest level since February, and British capsules a record level.

STOXX 50 added 0.1%, while MSCI’s world capital index, which tracks equities in 49 countries, rose 0.15% after gains in Asia.

The Brexit trade agreement contributes to a year-end bullish sentiment in markets where investors have looked ahead to an increase in new COVID-19 cases globally and rising unemployment in hopes that vaccines and more fiscal spending will help spur an economic recovery in 2021.

High on record amounts of central bank stimulus, investors have pushed stock markets to new peaks.

Mizuho analysts called it the “mistletoe effect”, where the expectation of a trade agreement meant that “despite being subject to the approval of Prime Minister Johnson and EU governments, the contour agreement was sufficient” to create a contraction in the markets.

Sterling added another 0.6% to $ 1.3586, close to its two-year high. Still, analysts say the pound’s 5% rally since early November means much of the Brexit easing has been priced in the currency.

“What was billed as an oven-ready deal has taken almost a year to defrost, but the fact that it now seems so much more palatable to both sides provides some much-needed Christmas cheer for investors,” said Susannah Streeter, senior investment and markets. analyst at Hargreaves Lansdown (LON :).

THE BRIGHT SIDE

The dollar rose 0.1% lower while the euro held around $ 1.22.

Wall Street ended mostly higher on Wednesday and futures pointed to a stronger opening later on Thursday.

A series of mixed US economic data this week have shown lower demands for unemployment and an increase in new orders for durable goods, but also a contraction in consumption spending, declining personal income and fading mood as the holiday shopping season draws to a close amid a reviving COVID – 19 pandemic.

Investors seem to be unlucky in buying stocks and looking on the bright side.

They also largely withdrew comments from US President Donald Trump that a stimulus bill of nearly $ 900 billion. Dollars agreed upon after months of quarreling in Congress were “a disgrace” which he may not have signed.

“While the pandemic meant lost lives and jobs in 2020, a successful rollout of the vaccine in 2021 is set to be a game changer: governments will gradually lift mobility restrictions, and communities will return to most pre-pandemic habits,” asset manager Candriam told his clients . .

“The rapid recovery in the third quarter of the Western Hemisphere and the ongoing expansion in Asia, where another wave of infections has largely been avoided, serve as a template for the near future.”

Oil prices fell but remained above $ 50 a barrel in light holiday trade as a fall in US stocks spurred hopeful demand.

futures returned previous gains, eventually falling 38 cents to $ 50.81 per share. barrel, while US West Texas Intermediate crude fell 41 cents to $ 47.71 per barrel. barrel.[O/R]

Gold prices rose marginally supported by the weaker dollar.

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