(Alliance News) - Stocks in London ended higher on Tuesday, rebounding from steep loses on Monday, as investors snapped up shares at cheaper prices, as markets were spooked by a new strain of Covid-19 and border disruptions at the start of the week.
The European Commission recommended a joint approach from EU members after individual countries imposed emergency restrictions.
The commission said: "Cargo flows need to continue uninterrupted… not least to ensure the timely distribution of Covid-19 vaccines, for example."
Further, UK Home Secretary Priti Patel said the government is "speaking constantly" with France to achieve a resolution "in both our interests" to get freight moving again.
The FTSE 100 index closed up 36.84 points, or 0.6%, at 6,453.16. The flagship index closed down 112.86 points, or 1.7%, at 6,416.32 on Monday.
The FTSE 250 ended up 258.61 points, or 1.3%, at 19,950.72. The AIM All-Share closed up 9.97 points, or 0.9%, at 1,099.18.
The Cboe UK 100 ended up 0.6% at 642.44, the Cboe UK 250 closed up 1.3% at 17,267.05, and the Cboe Small Companies ended up 0.8% at 11,289.02.
In Paris the CAC 40 ended up 1.4%, while the DAX 30 in Frankfurt rose 1.3%.
IG Group's Josh Mahony said: "UK markets are in recovery mode today, with yesterday's sharp slump in domestically-focused assets being partially reversed over the course of the day. Volatility seems to be a foregone conclusion as we head towards the year-end, with the Covid-led economic isolation of the UK serving to provide a heavy dose of reality of the kind of disruption that could come if negotiators fail to agree a deal by year-end.
"However, Brexit failure is not a certainty, and market sentiment over the coming week is going to be heavily dictated by the ability to find compromise on the remaining issues."
The pound bounced back against the dollar on Tuesday following positive UK economic growth data and as investors hold out hope for a last-minute Brexit deal.
Sterling had fallen to its lowest level since March on Monday after investors were spooked by fears of a new strain of Covid-19 and as a raft of European countries chose to close their borders to the UK, with the new year's eve Brexit deadline fast approaching.
The pound was quoted at USD1.3330 at the London equities close, up from USD1.3321 at the close Tuesday, on hopes a compromise can be reached on key issues.
In the latest developments, negotiators are making a "final push" to reach a post-Brexit trade deal, the EU's chief negotiator Michel Barnier said.
Barnier, who is leading the EU's team in negotiations with the UK, said it was a "crucial moment" with the current trading arrangements due to end on December 31.
He was briefing ambassadors from the 27 EU countries and MEPs about the state of the talks as time runs short for a deal to be reached.
In a sign of the intensive diplomatic activity, UK Prime Minister Boris Johnson is in "close contact" with European Commission President Ursula von der Leyen.
Downing Street sources said they were speaking "from time to time given there isn't long left" until the end of the Brexit transition period next week.
Talks in Brussels remain difficult, with "significant differences in key areas", including fishing and rules on maintaining fair competition. Downing Street insiders flatly rejected reports that there has been a breakthrough in the row over fishing quotas.
Analysts at ActivTrades said: "The pound is staging a comeback during Tuesday trading, recovering the previous session's losses to the euro and the dollar. Despite the disruption caused by the new COVID strain and the lack of agreement with the EU, with little more than a week before the end of the Brexit transition period, sterling is showing a resilience that points at investors' 'faith' in a trade deal between the UK and the EU.
"The current value of the British currency reflects, despite the woes the country currently faces, an optimistic market stance as to the future relationship with the European Union, with a no-deal scenario clearly priced out."
In the FTSE 100, banks ended in the green, with NatWest up 3.6% and Barclays and Lloyds both rising 3.3%, on Brexit optimism.
"UK-focused banks like NatWest, Barclays and Lloyds are some of the biggest risers on the FTSE 100. Banks took a beating yesterday because dealers were worried that their credit loss provisions might increase on account of the stricter restrictions that the UK is facing," said CMC Markets analyst David Madden.
SSE closed up 1.8% after the energy firm said it has agreed to sell its interests in its portfolio of gas exploration and production assets to Viaro Energy for GBP120 million.
The portfolio comprises non-operational stakes in over 15 producing fields in three regions in the North Sea.
In the FTSE 250, Signature Aviation ended the best performer, up 6.4% after Global Infrastructure Partners on Tuesday confirmed that it has made an approach to acquire the aerospace services provider, but added that there is no guarantee that it will make a firm offer.
Last Thursday, Signature Aviation said it received an indicative proposal from Global Infrastructure but rejected this as it was lower than a GBP3.17 billion tilt tabled by Blackstone Infrastructure Advisors and Blackstone Core Equity Management Associates.
The euro stood at USD1.2175 at the European equities close, down from USD1.2217 late Tuesday. Against the yen, the dollar was trading at JPY103.70, up from JPY103.50 late Tuesday.
Stocks in New York were mixed at the London equities close after Congress approved an economic relief package following months of protracted talks, as the number of Covid-19 cases reported in the US passed the 18 million mark.
The DJIA was down 0.4%, the S&P 500 index flat and the Nasdaq Composite up 0.6%.
Lawmakers in Washington have finally passed a bill setting aside around USD900 billion in support measures for the ailing US economy, bringing an end to months of haggling.
Brent oil was quoted at USD50.22 a barrel at the equities close, down from USD50.32 at the close Tuesday.
Gold was quoted at USD1,862.00 an ounce at the London equities close, lower against USD1,875.05 late Tuesday.
The economic events calendar on Wednesday has Germany import prices at 0700 GMT, Spain GDP at 0800 GMT and US jobless claims at 1330 GMT.
There are no events scheduled in the UK corporate calendar Wednesday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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