The British pound rose on Thursday as Britain and the European Union clinched a free trade deal, while a global gauge of stocks edged upward amid investor optimism toward economic growth.
Britain hammered out the final details of a narrow agreement with the EU just seven days before it exits the trading bloc.
Sterling momentarily extended its climb against the dollar on the news, rising as much as 0.94%, but then pared gains. Analysts said the pound’s 5% rally since early November meant that much of the Brexit relief had already been priced into the currency.
Still, the pound was last up 0.35% at $1.3547 on Thursday.
“What was billed as an oven-ready deal has taken a nearly a year to defrost, but the fact it now seems so much more palatable for both sides is providing some much needed Christmas cheer for investors,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
The trade deal helped European equities edge higher as well. The STOXX index rose 0.13%.
Canada’s main stock index finished narrowly higher on Thursday in a shortened trading session.
The Toronto Stock Exchange’s S&P/TSX composite index was up 30.31 points, or 0.17%, at 17,623.88.
The energy sector dropped 0.8% on falling crude prices, while adding to the downbeat mood, the materials sector , which includes precious and base metals miners and fertilizer companies, finished flat.
The S&P 500 ended higher at the close of a shortened session on Thursday as investors headed into the long Christmas weekend with hopes that an imminent stimulus agreement, a Brexit deal, and the ongoing vaccine rollout will spell brighter days in the coming year.
All three major U.S. stock indexes ended in positive territory.
While stocks tend to perform well in the closing days of December, a phenomenon known as the Santa Claus rally, the resurgent pandemic and upcoming Senate runoffs in Georgia have clouded the outlook this year.
The U.S. House of Representatives blocked President Donald Trump’s attempt to change a $2.3 trillion coronavirus relief and government spending package after Trump insisted on $2,000 direct payments to Americans.
The move cast doubt as to whether the package passed by Congress on Monday would be signed into law and raised the threat of a partial government shutdown.
“If (stimulus) doesn’t get passed in some form or another it could mean severe consequences for the unemployed,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
Britain reached a trade deal with the European Union after months of negotiations, just days before leaving one of the world’s largest trading blocs.
“(The Brexit deal) might be acting as a buffer for the market in the sense that it’s counteracting the negativity of the stimulus bill being stalled,” Cardillo added.
More than one million Americans have now been vaccinated against COVID-19 even as the pandemic continues to rage in the United States and political leaders moved to guard against a more contagious variant of the disease sweeping across Britain.
Unofficially, the Dow Jones Industrial Average rose 71.42 points, or 0.24%, to 30,201.25, the S&P 500 gained 13.25 points, or 0.36%, to 3,703.26 and the Nasdaq Composite added 33.62 points, or 0.26%, to 12,804.73.
Shares of Alibaba Group BABA.N dropped on news that China had launched an investigation into the company as part of its antitrust crackdown. )
American Airlines Group Inc AAL.O said it was moving forward with plans to recall furloughed workers, even as forthcoming payroll protections, part of the stimulus package, was called into doubt. Its shares closed lower.
Moderna Inc said that it expects its coronavirus vaccine to be effective against a new variant of the disease discovered in Britain. Even so, its shares have dipped..
The advances in U.S. and European stocks, along with previous gains in Asia, helped send MSCI’s world equity index 0.09% higher.
Among currencies, the U.S. dollar index shed earlier losses to edge 0.02% higher as the pound cut its gains. The euro dipped 0.00% to $1.2187.
U.S. Treasury yields dropped in light volume. Benchmark 10-year Treasury notes last rose 7/32 in price to yield 0.933%, from 0.955% late on Wednesday.
Gold prices rose slightly as sterling kept the dollar’s gains in check. Spot gold added 0.3% to $1,877.45 an ounce.
Copper prices dipped but remained near their highest levels since 2013, while other industrial metals rose.
Oil prices edged lower on Thursday as concerns about a new variant of COVID-19 tempered optimism over news that Britain and the European Union had signed a post-Brexit trade deal.
U.S West Texas Intermediate (WTI) crude was down 15 cents, or 0.3%, to $47.96 , while Brent crude futures fell 19 cents to $51.01. Volumes were light on the last trading day before the Christmas holiday.
Both contracts gained more than 2% on Wednesday.
By clinching a Brexit trade deal, Britain avoids a chaotic departure from one of the world’s biggest trading blocs, a move many investors warned would have sparked further volatility in financial markets.
“While the Brexit deal is supportive, the impact of COVID is the dominant driver in the oil market,” said Andrew Lipow, president of Lipow Oil Associates, in Houston, Texas. “Like everyone else the oil market is waiting for the wider distribution of vaccines to get the public back on the road and in the air.”
Reuters
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