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(Alliance News) - Stocks in London ended higher on Wednesday with investors hopeful a long, sought-after Brexit agreement was within reach following optimistic comments from the UK and on the continent.
It is "possible but far from certain" that a post-Brexit trade deal could be agreed with Brussels on Wednesday, a Downing Street source has said.
The internationally-exposed FTSE 100 closed up 42.59 points, or 0.7%, at 6,495.75. The domestic-focused FTSE 250 ended up 347.04 points, or 1.7%, at 20,297.76. The AIM All-Share closed up 14.62 points, or 1.3%, at 1,113.80.
The Cboe UK 100 ended up 0.6% at 646.65, the Cboe UK 250 closed up 2.2% at 17,649.94 and the Cboe Small Companies ended up 2.1% at 11,522.52.
In Paris the CAC 40 ended up 1.1%, while the DAX 30 in Frankfurt ended 1.3% higher.
"Increased chatter than the UK and the EU will reach a trade deal has boosted sentiment. Equity markets were already up on the session in advance of the optimism surrounding the trade talks, so then the bullish move was turned up a notch. The Covid-19 crisis is still very much in the news but for now traders are fixated on the UK-EU situation. On the London market, banks, housebuilders, airlines and transport stocks are showing decent gains. The FTSE 100 is seeing its gains capped by the rise in the pound," said CMC Markets analyst David Madden.
The pound was quoted at USD1.3525 at the London equities close, up sharply from USD1.3300 at the close Tuesday, as comments from the UK and EU on Brexit developments were warmly greeted by investors, with the new year's eve deadline fast approaching.
The European Union and the UK could agree the terms of a post-Brexit trade deal within hours, European sources also told AFP, as negotiations continued.
"We are in the final phase," one official said. Asked whether this meant a deal later Wednesday, a source close to the talks said: "Very likely, yes."
Earlier, a UK Cabinet minister has indicated that hopes are rising for a post-Brexit trade deal although major differences still remain between the UK and EU.
Negotiators are continuing to talk in Brussels, while UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen are in close contact in an effort to resolve remaining difficulties.
UK Cabinet minister Robert Jenrick said he is "reasonably optimistic" that a late deal will be agreed before the current trading arrangements expire at the end of the month.
Johnson has previously said that the most likely outcome is failure to reach a deal, with the UK then relying on World Trade Organisation terms - meaning tariffs and quotas on trade with the EU.
"Investors seem to particularly appreciate the last effort being made by British and European negotiators on a 'final push' for a Brexit deal. Even if no strong directional market movement is expected before 2021, the bullish scenario remains the most likely as bullish leverages remain stronger than bearish ones," said analysts at ActivTrades.
The pound was also supported by a reopening of the port of Dover, which eased conditions for hauliers carrying vital goods.
Europe on Wednesday began easing travel bans on Britain put in place to contain a new strain of Covid-19 that UK officials believe is spreading faster as World Health Organization experts were set to meet on a response to the variant.
Some European countries have started relaxing travel restrictions on people arriving from the UK after a two-day blockade imposed because of a new variant of coronavirus.
Goods and passengers from the UK began arriving on French shores on Wednesday as a deal allowing truckers and travellers with a negative test to cross the Channel brought some relief.
The Netherlands, Belgium and Bulgaria also relaxed travel restrictions and Eurostar passenger train traffic was resuming, but only for citizens of Europe's border-free zone, British citizens with EU residency and those with a special reason to come temporarily, such as truckers.
France's relaxation of a 48-hour blockade meant stranded lorry drivers in the UK were finally offered a way home after thousands were blocked around the port of Dover for days. Under France's new rules, EU nationals and residents are allowed home with a negative Covid test, though Britons remain barred.
However, millions more people in England will be placed into lockdown from Boxing Day as ministers acknowledged mounting concern about the spread of coronavirus.
Health Secretary Matt Hancock said the variant coronavirus was spreading at a "dangerous rate" as he announced the fresh Tier 4 restrictions.
He also said cases of another new mutant coronavirus linked to South Africa had been found in the UK and placed travel restrictions on the country.
Meanwhile, WHO's Europe director Hans Kluge wrote on Twitter that the organisation would "discuss strategies for testing, reducing transmission & communicating risks". He added that "limiting travel to contain spread is prudent until we have better info".
The move comes as the co-founder of BioNTech assured the firm's vaccine is "highly likely" to work against the mutated virus strain detected in the UK. And if not, the vaccine could be adapted in six weeks, Ugur Sahin said, adding that tests are already being run on the variant.
In the FTSE 100, domestic lenders and housebuilders ended in the green on Brexit deal optimism. Lloyds, NatWest and Barclays closed up 7.0%, 5.0% and 4.0% respectively. Housebuilders Berkeley, Persimmon, Barratt Developments and Taylor Wimpey ended up 4.7%, 4.3%, 4.2% and 3.8%, respectively.
"UK-focused banks and housebuilders are in strong form thanks to the Brexit news, which offers a chance of removing at least some of the cloud of uncertainty that has dogged UK stocks for so long. There is some hope, however misplaced, that an actual deal, while likely to be followed up by more negotiations, will at least take Brexit off the front pages for a time and allow a more rational assessment of UK stocks to take place, especially now that the Covid vaccine's distribution is in full swing," said IG Group's Chris Beauchamp.
In the FTSE 250, Cairn Energy ended the standout performer, up 22%, after the oil & gas exploration and development company said a tribunal established to rule on its claim against the Indian government found in the company's favour, to the tune of USD1.2 billion.
Cairn's claim was brought under the terms of the UK-India Bilateral Investment Treaty. The tribunal ruled unanimously that India had breached its obligations to Cairn under the treaty and has awarded Cairn damages of USD1.2 billion plus interest and costs, which now becomes payable.
The dispute between Cairn Energy and the Indian government stretches back to early 2014, when the Indian government froze Cairn Energy's 10% stake in Cairn India following the introduction of retrospective tax legislation.
The euro stood at USD1.2195 at the European equities close on Wednesday, up from USD1.2175 a day before. Against the yen, the dollar was trading at JPY103.55, down from JPY103.70 late Tuesday.
Stocks in New York were mostly higher at the London equities close following a dip in US jobless claims, shrugging off President Donald Trump's sharp criticism of the stimulus package.
The DJIA was up 0.6%, the S&P 500 index up 0.4% and the Nasdaq Composite was flat.
The latest US initial jobless claims numbers dipped after rising for two straight weeks, figures from the Department of Labor showed.
Initial jobless claims stood at 803,000 in the week ended December 19, down from a revised 892,000 the week prior. This beat forecasts, according to FXStreet, for jobless claims to come in at 885,000, which would have been steady on the figure originally reported for the week to December 12.
Trump, in a taped message on Twitter, slammed the USD900 billion economic package as a "disgrace" and called for stimulus payments to be raised to USD2,000 from USD600, raising the possibility he could veto the long-debated measure.
Investors looked past the risk the bill could die and instead focused on the possibility of a richer stimulus.
Brent oil was quoted at USD51.03 a barrel at the equities close, up sharply from USD50.22 late Tuesday.
Gold was quoted at USD1,872.05 an ounce at the London equities close, higher against USD1,862.00 late Tuesday.
A light economic events calendar on Thursday has Canada building permits at 1330 GMT. Financial markets will close at 1230 GMT on Thursday for Christmas Eve.
There are no events scheduled in the UK corporate calendar on Thursday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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