December 24, 2020: The pound extended gains Thursday and equity markets mostly rose as Britain and the European Union finally homed in on a Brexit trade deal, while traders brushed off concerns about the US stimulus package after Donald Trump slammed it.
After months of painful, stuttering talks, London and Brussels appeared on the verge of signing an agreement as they eventually found common ground on key sticking points.
The two sides were working on the final details of a deal early Thursday, ahead of what negotiators hoped would be a pre-dawn breakthrough, helped by a series of talks between Prime Minister Boris Johnson and European Commission chief Ursula von der Leyen.
“Brexit work will continue throughout the night,” EC spokesman Eric Mamer tweeted just after 1:00 am (0000 GMT).
“Grabbing some sleep is recommended to all Brexit-watchers at this point. It will hopefully be an early start tomorrow morning.”
European officials had earlier announced: “We are in the final phase.”
A French government source said UK negotiators had made “huge concessions” on fisheries — the main point of conflict that was holding up an agreement ahead of Britain's departure at the end of next week.
Sterling, which has swung wildly in recent weeks as the talks ebbed and flowed, extended Wednesday's rise of more than one percent against the dollar, while it was also holding similar gains against the euro.
“So, the never-ending ebb and flow of Brexit headline roistering might finally see closure on the most widely contested divorce in the history of humanity,” said Axi strategist Stephen Innes.
Optimism that the long-running saga could be at its endgame also provided a lift to European equities and Asia followed suit with all markets in positive territory.
– Alibaba tumbles –
However, Hong Kong was being weighed by a fall of more than seven percent in Alibaba shares after China said it had launched a probe into the e-commerce titan for “suspected monopolistic practices”, while authorities were also holding “supervisory and guidance” talks with the firm's financial services subsidiary Ant Group.
Equity gains, however, remain tethered by ongoing concerns about the surge in virus infections around the world that are forcing governments to impose fresh containment measures, offsetting hopes for the rollout of vaccines.
Analysts said that while Trump's outburst against a $900 billion stimulus agreement was holding up help for American families, the general consensus is that a package will eventually be passed, and possibly with more cash handouts.
The president on Wednesday vetoed a huge defence bill, jolting investors on Wall Street, though there is a talk that lawmakers will override that with a two-thirds majority in both houses of Congress next week.
Trump did not indicate whether or not he will also veto the stimulus deal but Democrats, who had been pushing for a much bigger relief package, cheered his statement and said they would introduce a stand-alone measure to increase payments.
Analysts said politicians were unlikely to let the agreement fall apart and there was a chance they would make improvements to it.
But while the mood on trading floors is upbeat at the moment, Michael Purves, CEO of Tallbacken Capital Advisors, was staying circumspect after the recent rally across world markets this year.
“Right now, we have a lot of animal spirits surging into year end,” he told Bloomberg TV.
“As constructive as I am on markets in the broader term, I do expect there will be a hangover of sorts to process this over-extension some time later this winter.”
– Key figures around 0230 GMT –
- Tokyo – Nikkei 225: UP 0.5 percent at 26,665.72 (break)
- Hong Kong – Hang Seng: UP 0.2 percent at 26,393.02
- Shanghai – Composite: UP 0.1 percent at 3,386.99
- Pound/dollar: UP at $1.3556 from $1.3515 at 2145 GMT
- Euro/pound: DOWN at 90.10 pence from 90.16 pence
- Euro/dollar: UP at $1.2211 from $1.2185
- Dollar/yen: UP at 103.56 yen from 103.53 yen
- West Texas Intermediate: UP 0.1 percent at $48.17 per barrel
- Brent North Sea crude: UP 0.1 percent at $51.23 per barrel
- New York – Dow: UP 0.4 percent at 30,129.83 (close)
- London – FTSE 100: UP 0.7 percent at 6,495.75 (close)