European shares rose for a third straight session on Thursday with a Brexit trade deal finally in sight just a week before the UK cuts its ties with the EU.
London mid-caps jumped 1.2 percent to end a holiday-shortened session at their highest since February, while the FTSE 100’s gains were limited by a stronger pound weighing on the exporter-heavy index.
Brexit-sensitive banks led the pan-European STOXX 600 index 0.2 percent higher to make up losses from earlier in the week when a new fast-spreading variant of the novel coronavirus spooked markets. The index was virtually unchanged for the week.
After months of wrangling, and amid warnings of no deal, the UK and the EU struck a narrow trade agreement, sources in London and Brussels said, swerving away from an acrimonious split five years after the Brexit referendum.
The UK yesterday published the text of the agreement, which includes a 1,246-page trade document, as well as agreements on nuclear energy, exchanging classified information, civil nuclear energy and a series of joint declarations.
The treaty explicitly recognizes that trade and investment require conditions for “a level playing field for open and fair competition.”
On financial services, which drive the British economy, the two sides simply commit “to establish a favorable climate for the development of trade and investment between them.”
“If you look at it in the very long run ... finding a deal at the 11th hour is going to be positive from a growth potential side for the UK economy, and therefore, ultimately ... to stocks,” ING Groep NV eurozone senior economist Bert Colijn said on Thursday.
Banks jumped 0.7 percent on Thursday, with the UK’s Lloyds Banking Group and Barclays PLC up 4 percent and 1.8 percent respectively.
Irish stocks closed down 0.3 percent, with Flutter Entertainment falling 2.2 percent, making the travel and leisure sector the biggest decliner in Europe.
France’s CAC 40 closed down 0.1 percent, while Spain’s lender-heavy index climbed 0.5 percent.
Stock markets in Germany, Italy and Switzerland were closed for the Christmas holidays.
Unprecedented amounts of stimulus, and lately vaccine optimism, have seen the STOXX 600 rise close to 50 percent from its March lows, although it still remains about 9 percent below this year’s pre-pandemic high and is on course to end the year about 5 percent lower.
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