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European Stocks Continue Rally as Brexit Deal is Imminent

European stocks were on course for a third session of straight gains thanks to banks, as a Brexit trade agreement appeared to be all but done

On Thursday, European stocks were on course for a third session of straight gains thanks to banks, as a Brexit trade agreement appeared to be all but done, with only a week left for Britain’s transition period to end on December 31st, finalizing its exit from the European Union. According to sources in Brussels and London, amidst warnings of not agreeing to a deal and months of wrangling, the European Union and Britain were finally on the cusp of making a narrow trade deal. This comes five years after the initial referendum had taken place in Britain. 

According to Simon Coveney, the Irish Foreign Minister, there was just a last-minute hurdle over fishing rights that had delayed the trade deal, but an announcement was expected to be made later in the day. There was a half a percentage gain in London mid-caps, as they reached their highest level after February, while the FTSE 100 managed to remain steady, as a stronger pound weighed on the index. There was a 0.2% jump in the European STOXX 600 index, as it aimed to start the Christmas holidays after making up for all the losses at the start of the week when markets had become spooked due to a fast-spreading new strain of the coronavirus.

Market analysts said that investors were quite curious to see what the two parties would finally decide on. They said that the big theme that had to be seen was whether tariffs were off the table, as they were considered crucial to reducing the impact on exporters in Europe. Experts said that considering the long-run, reaching a trade deal at the 11th hour would certainly be a positive for the UK economy, as far as growth is concerned, which means that it would definitely benefit stocks. There was a 0.9% increase in banks with Britain’s Barclays and Lloyds up by 3.4% and 4.1%, respectively.

On the other hand, copper prices remained flat after a rally, which prompted basic material stocks to lag. The German stock markets, as well as those in Switzerland and Italy, were shut down for the Christmas holiday break. Trading will go back to normal from Monday, December 27th, 2020. The vaccine optimism of late and the unprecedented amount of central bank stimulus has led to a nearly 45% increase in the STOXX 600 index from its March lows. However, it is important to note than it is still 9% below the high it had achieved this year before the pandemic. 

Hence, it is on course to end this year lower by 5%. Oil and bank stocks have weighed the most on concerns about the economic toll associated with the coronavirus pandemic. In contrast, the technology stocks have been leading the recovery in most sectors, since they had emerged as winners in the pandemic due to the work-from-home trend that had become the norm amidst the lockdown and social distancing measures. The announcement of a trade deal is imminent and all eyes are waiting for it.

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