Britain and the European Union were hammering out the final details of a narrow trade deal on Thursday with an announcement expected imminently, adding to an optimistic mood in the final trading session before the Christmas break.
While a last-minute deal has long been expected, finally removing the possibility of a no-deal outcome 4-1/2 years after Britain voted to leave the trading bloc will come as a relief to markets.
The FTSE 100 rose 0.07% while the more domestically-focused British mid-cap FTSE 250 index hit its highest levels since February, and UK small caps a record high. The STOXX 50 added 0.17% while Germany’s DAX gained 1.26%.
The MSCI world equity index, which tracks shares in 49 countries, rose 0.16% after solid gains in Asia.
The Brexit deal adds to an end-of-year bullish mood in markets, where investors have looked beyond a spike in new COVID-19 cases globally and rising unemployment to the hope that vaccines and more fiscal spending will help spur an economic recovery in 2021.
High on record sums of central bank stimulus, investors have pushed stock markets to new peaks.
Mizuho analysts dubbed it the “mistletoe effect”, whereby anticipation of a trade accord meant that “despite being subject to the approval of PM Johnson and EU governments the outline deal was enough” to stoke a rally in markets.
“While the pandemic meant lost lives and lost jobs in 2020, a successful vaccine rollout during 2021 is set to be a game-changer: governments will gradually lift mobility restrictions and societies will return to most pre-pandemic habits,” Candriam told clients.
“The swift recovery during the third quarter in the Western hemisphere and the ongoing expansion in Asia, where a second infection wave has mostly been avoided, serve as a template for the near future.”
Brent crude futures rose 37 cents to $51.57 a barrel, while U.S. West Texas Intermediate crude increased 34 cents to $48.46, buoyed by a drawdown in U.S. stockpiles and the potential Brexit trade deal.
Gold prices rose, with the spot price of the precious metal at $1,878, 0.3% higher on the day.
