Brexit deal fuels sterling while global stocks edge higher ahead of holiday

[NEW YORK] 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 US dollar on the news, rising as much as 0.94 per cent, but then pared gains. Analysts said the pound's 5 per cent rally since early November meant that much of the Brexit relief had already been priced into the currency. Britain also faces challenges from a new variant of Covid-19.

Still, the pound rose 0.27 per cent to US$1.3537.

"The big news here is that the worst-case scenario didn't happen," said Jason Brady, chief executive of Thornburg Investment Management.

"There are still some big challenges in the UK economy, and they're doing a pretty aggressive lockdown, which is going to have economic implications."

The trade deal helped European equities edge higher as well.

The STOXX index rose 0.12 per cent.

US stocks also advanced slightly in thin volume ahead of the Christmas holiday as investors maintained hopes of economic recovery, despite blocked attempts in Congress to alter a US$2.3 trillion coronavirus aid and government spending package.

US President Donald Trump had previously stated that he might not sign the Bill without significant changes.

Optimism about a full-scale roll-out of Covid-19 vaccines next year has largely kept stocks buoyed in despite the delays in further stimulus, said Arnim Holzer, macro and correlation defense strategist at EAB Investment Group.

Moreover, he added, investors still expect greater fiscal spending to come under President-elect Joe Biden next year.

"The first thing to recognise is that this is not a full-blown stimulus," he said.

"It's really a stop-gap measure. President-elect Biden has stated we still have more work that needs to be done."

MSCI's world equity index ticked up 0.19 per cent.

On Wall Street, the Dow Jones Industrial Average rose 70.04 points, or 0.23 per cent, to 30,199.87, the S&P 500 gained 13.05 points, or 0.35 per cent, to 3,703.06 and the Nasdaq Composite added 33.62 points, or 0.26 per cent, to 12,804.73.

Trading in US stocks and bonds ended early on Thursday, and the markets will be closed on Friday for Christmas.

Among currencies, the US dollar index shed earlier losses to rise 0.06 per cent as the pound cut its gains. The euro dipped 0.05 per cent to US$1.2181.

US Treasury yields dropped in light volume. Benchmark 10-year Treasury notes rose 9/32 in price to yield 0.9264 per cent, from 0.955 per cent late on Wednesday.

Optimism over the Brexit trade deal kept oil prices steady, despite lingering concerns about a new variant of Covid-19.

Brent settled at US$51.29 a barrel, up 0.18 per cent, while US crude edged up 0.23 per cent to US$48.23 a barrel.

Gold prices rose as investors remained optimistic about US stimulus and the Brexit trade deal kept the dollar's gains in check. Spot gold added 0.3 per cent to US$1,877.77 an ounce.

Copper prices were little changed, near their highest levels since 2013, while other industrial metals rose.

REUTERS