Europe close: Stocks start 2021 on front foot, but end day off best levels
European shares finished the first session of the year higher, driven by the Brexit trade agreement, but uncertainty ahead of two run-off votes for the US Senate the next day dragged stockmarkets off their best levels.
The prospect of tighter Covid-19 lockdowns in the UK and on the Continent and reports of a slow start to vaccinations in many countries also dragged on investor sentiment.
In the US meanwhile, voter polls that were too close to call fanned concern that Democrats might gain control of the country's Senate and allow them to push through bigger spending programmes - and taxes - leading to soft trading on Wall Street.
The pan-European STOXX 600 index ended the day 0.67% higher at 401.69, while the UK’s FTSE 100 rose 1.72% in the first trading day of Britain's existence outside the European Union since 1973.
"Stock markets have found it tougher to maintain their optimistic tone from earlier in the day as the UK seems set to head back into full lockdown, and in the US tensions mount regarding the Georgia senate election tomorrow," said IG's chief market analyst, Chris Beauchamp.
"The confident write-ups from earlier today that predicted a strong year ahead based on the first hours of trading have been scrubbed as Wall Street heads sharply into the red."
Euro strength was likely another drag on the German DAX, which added just 0.06% to 13,726.74, after recovering from a dip just prior to the close of the session.
The French CAC rose 0.67% to 5,588.96 while the FTSE Mibtel put on 0.37% to end the day at 22,315.87.
In equity news, shares in Ladbrokes owner Entain topped the gainers, soaring 26% despite rejecting an $11bn bid proposal from US casino operator MGM Resorts, saying it significantly undervalued the business.
Precious metals miners were on the rise as gold prices shone and miners generally stronger after a closely-followed survey of Chinese factory activity pointed to a continued economic recovery.
The Stoxx 600 sector gauge for Basic Resources thus jumped 3.64%, with Fresnillo, Polymetal, Centamin, Anglo American, Glencore, BHP and Rio Tinto all up.
Banks and travel-related stocks on the Stoxx 600 however both finished well beneath their best levels of the session.
Rolls-Royce fell after the Financial Times reported that the engine maker will be putting its UltraFan engine programme "on ice" when testing finishes in 2022.
While the FTSE was up on Brexit deal optimism, there was still some concern about the fact that a deal was not agreed on financial services, which make up 80% of the UK economy. Shares in banks such as Lloyds, Barclays and NatWest were all lower.