Europe close: Shares crawl higher as EU, UK flounder on Brexit deal
European stocks broke for the holiday season marginally higher as investors were still awaiting the much-heralded "imminent" Brexit trade deal.
The pan-European STOXX 600 index was up 0.17%, having taken a pounding earlier in the week on fears of no-deal, a new strain of the coronavirus hitting England and a snap French blockade of British travellers.
London's FTSE 100 closed up just 0.1% at 6,501.72. Meanwhile, the pound was 0.7% higher against the dollar at 1.3586 and 0.6% firmer versus the euro at 1.1138 as investors awaited an announcement on a Brexit trade deal.
A stronger pound tends to hold back the top-flight index as around 70% of its constituents derive their earnings from overseas.
Reports from Brussels suggested the two sides were still haggling over the economically immaterial issue of fishing rights. Four and a half years after Britain chose to leave the European Union and just days before the transition period was due to end, officials were still apparently arguing over mackerel and herring.
IG analyst Chris Beauchamp said: "Meanwhile it looks like there is still some juice in the tank for sterling’s rally against the dollar and euro, pushed higher by latecomers who have joined the party as a no-deal finally seems to have receded from view."
"We are on the cusp of a major sea-change for UK assets, if a deal is done (always wise not to assume these things before the signing is done and dusted) - Brexit will diminish in its overall presence on the front pages, even if it does not go away entirely, and thus investors can hopefully start to take a different view of the UK’s economic prospects."
Paul Dales, chief UK economist at Capital Economics, said that since markets have largely been expecting a deal for some weeks, there is limited scope for more Brexit-related gains in the coming days and weeks.
"Instead, it is the prospect of an eventual decent UK and global economic recovery from the Covid-19 crisis that explains why we think the pound will rise to $1.40 in 2021 and the FTSE 100 will climb to 7,500," he said.
With traders eyeing the Christmas break, volumes were thin. Bank stocks rose on Brexit hopes, with Barclays and Lloyds both gainers this morning.
Payments firm Network International Holdings was the top gainer, up 7% as the company said it would publish a response to a critical report from short seller ShadowFall in January.