UPDATE 2-UK stocks recover on Brexit progress hopes after virus-led pullback

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* Britain's fishing rights offer raises hopes for a deal

* UK economy recovers 16% in Q3, recession risks loom

* AstraZeneca down as asthma drug trial fails

* FTSE 100 up 0.6%, FTSE 250 adds 1.3%
(Updates to market close)

By Medha Singh

Dec 22 (Reuters) - UK stocks bounced on Tuesday as fresh
hopes of a trade deal with the European Union outweighed fears
over a mutated variant of the novel coronavirus that has shut
most of the island country.

The mid-cap FTSE 250, considered a barometer for
Brexit sentiment, added 1.3% as the EU chief negotiator said
both sides were inching towards an agreement on fishing though
the politically sensitive matter remains unresolved.

Banks and industrials and consumer discretionary were the
biggest boost to the domestically focused index.

The blue-chip FTSE 100 closed 0.6% after wiping off
more than half of its gains for December on Monday as UK imposed
tough restrictions and countries around the world shut their
borders to Britain due to worries about the new variant.

"The COVID crisis and Brexit uncertainty look set to hang
over equities for the rest of the calendar year and January
could be a difficult period unless there is progress in getting
the virus under control and clarity on when more people will get
vaccinated," said Russ Mould, investment director at AJ Bell.

Official data showed Britain's economic recovery from its
coronavirus crash was quicker than previously thought in the
third quarter, but new lockdowns are threatening to cause a
another recession.

Drugmaker AstraZeneca Plc slipped 1.5% after its
experimental asthma drug with Amgen Inc failed to meet
the main goal of reducing patients' dependence on steroids in a
late-stage trial.

Irish gas station operator Applegreen Plc rose
2.5% after agreeing to be acquired by a consortium led by B&J
Holdings and Blackstone Infrastructure Partners in a deal that
valued it at around $877.66 million.
(Reporting by Medha Singh and Shivani Kumaresan in Bengaluru;
Editing by Rashmi Aich, Sriraj Kalluvila and Richard Chang)