European markets shattered by dwindling Brexit deal hopes

Dec 11, 2020: Europe's stock markets and the pound slumped Friday after both London and Brussels warned that a no-deal Brexit was a strong possibility, sending investors running for the hills.

London stocks sank 1.2 percent nearing midday, while Frankfurt tanked 2.1 percent and Paris was down 1.4 percent in early afternoon eurozone deals.

"Stock markets have been hit by fears that the UK and the EU will not reach a trade agreement," said CMC Markets analyst David Madden.

"With respect to British-European relations, things have gone from bad to worse this week and now both sides are saying that a no-deal outcome is a very real possibility."

The pound sank close to a one-month low at $1.3185, while the euro jumped to 91.93 pence -- the highest level since late September.

- 'Low expectations' -

EU chief Ursula von der Leyen has told the bloc's leaders there were "low expectations" a post-Brexit trade deal could be struck with Britain, EU sources said, two days ahead of a crunch decision on talks.

An EU official said leaders heard that the "probability of a no deal is higher than of a deal" in a brief discussion of Brexit at a marathon Brussels summit, as time ticks down to a Sunday deadline to make a call on prolonging negotiations or giving up.

British Prime Minister Boris Johnson also warned Thursday there was a "strong possibility" of no deal -- and instructed his government to prepare for Britain to crash out of the European Union's single market at the end of this year.

Talks continue on Friday between EU and British negotiators but they are struggling to break their deadlock on issues including fishing rights and fair trade.

The possibility that Britain will crash out of the EU had also sent the pound tumbling Thursday as investors contemplated cross-Channel trade being subject to tariffs and quotas from January 1.

The Bank of England admitted Friday that financial services faced "some disruption" when the deadline passes, but added UK commercial lenders -- already facing harsh coronavirus fallout -- were well-prepared for fresh economic turmoil.

- Stimulus news -

Elsewhere, Asian equities mostly rose Friday but stalled US stimulus talks and rising Covid-19 infections continue to counter vaccine optimism.

While most observers are confident the world economy will enjoy a healthy recovery next year as inoculations are administered, the immediate impact of the disease as countries endure a fresh wave was acting as a drag on trade.

There was however some good news on the stimulus front in Europe as EU leaders finally resolved a bitter dispute with Poland and Hungary that saved a landmark 1.8-trillion-euro ($2.1-trillion) recovery plan for the beleaguered bloc.

Also Thursday, the European Central Bank boosted its main virus-fighting tool, an emergency bond-buying programme, by 500 billion euros to 1.85 trillion euros and extended it by nine months.

- Key figures around 1150 GMT -

London - FTSE 100: DOWN 1.2 percent at 6,523.29 points

Frankfurt - DAX 30: DOWN 2.1 percent at 13,021.97

Paris - CAC 40: DOWN 1.4 percent at 5,470.37

EURO STOXX 50: DOWN 1.6 percent at 3,464.81

Tokyo - Nikkei 225: DOWN 0.4 percent at 26,652.52 (close)

Hong Kong - Hang Seng: UP 0.4 percent at 26,505.87 (close)

Shanghai - Composite: DOWN 0.8 percent at 3,347.19 (close)

New York - Dow: DOWN 0.2 percent at 29,999.26 (close)

Pound/dollar: DOWN at $1.3216 from $1.3295 at 2200 GMT

Euro/pound: UP at 91.78 pence from 91.29 pence

Euro/dollar: DOWN at $1.2130 from $1.2138

Dollar/yen: DOWN at 104.04 yen from 104.24 yen

West Texas Intermediate: DOWN 0.4 percent at $46.60 per barrel

Brent North Sea crude: DOWN 0.4 percent at $50.04

AFP/APP