Europe Markets


Sterling surges after post-Brexit trade deal is hammered out

Visitors look out across the National Mall toward the Washington Monument from the Lincoln Memorial at sunrise on Sunday.

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European stocks rose Monday as investors welcomed news that President Donald Trump had backed down from a veto threat and signed a $900 billion pandemic relief bill, and cheered last week’s post-Brexit trade agreement.

The Stoxx Europe 600 index XX:SXXP gained 0.7% to 398.63, while the German DAX DX:DAX jumped 1.4%. The French CAC 40 FR:PX1 rose 1%, and the FTSE MIB Italy IT:I945 index gained 0.6%

The FTSE 100 index UK:UKX was closed for an extended holiday break, but the British pound GBPUSD climbed 1.2% to $1.3512 on relief over a historic deal agreed on Christmas Eve to define the U.K. and EU trade relationship. Trading conditions were thinner than usual due to the holiday in Britain.

The trade deal, which comes into force on Jan. 1, covers trade that was worth £668 billion ($905 billion) in 2019 and guarantees tariff-free trade on most goods, said U.K. Prime Minister Boris Johnson, who lauded the deal , reached with Ursula von der Leyen, president of the European Commission.

“The signing of the Brexit trade agreement [brought] a massive sigh of relief to financial markets, which had spent the last few months buying sterling in anticipation of the outcome,” said Jeffrey Halley, senior market analyst, Asia Pacific, at OANDA, in a note to clients.

Top envoys in Brussels greenlit the deal on Monday, giving it provisional approval.

Halley said sterling was likely headed to $1.3800 in coming weeks but markets would likely “wait until next week though before buying again, fearful of massive bottlenecks at the English Channel as the new rules take effect.”

U.S. stocks DJIA SPX COMP traded higher at the start of Monday’s session , buoyed by the stimulus deal. After holding out for days while suddenly airing complaints about the size of the negotiated relief checks, Trump finally signed the massive bill at his private club in Florida late Sunday . In a statement, he said Congress would vote on lifting individual payments from the current $600 to $2,000.

House Democrats last week tried to do just that but were blocked by Republicans , who have split with Trump on the package. House Speaker Nancy Pelosi said she would hold another vote on Monday .

Read: ‘More help is on the way’: The long wait is over for second stimulus check, but will $600 be enough?

The “possibility of an increase in direct payments above $600 should be a market positive on top of the boost received from the president’s signature. With one eye on the Georgia Senate runoff on Jan. 5, politicians from both sides may also feel slightly more generous than a week ago,” said Halley.

Drug manufacturers were leading the gains among Europe stocks on Monday, with shares of Novartis NVS CH:NOVN up 1.8% and Roche Holding CH:ROG up 0.7%. In Germany, shares of Bayer XE:BAYN rose 2%.

Europe kicked off its COVID-19 vaccination program over the weekend, using the vaccine developed by Germany’s BioNTech  BNTX with American partner Pfizer PFE UK:0Q1N .

AstraZeneca AZN UK:AZN Chief Executive Pascal Soriot said Sunday that researchers believe the COVID-19 vaccine his company is developing with Oxford University will work against a new strain of the virus driving a surge in U.K. infections. That vaccine is widely expected to gain U.K. approval this week. Shares of AstraZeneca were modestly higher.

Shares of Commerzbank dropped 0.8% after the German bank said it would book provisions of 610 million euros ($743.2 million) in the fourth quarter due to its restructuring program.

Adidas shares XE:ADS rose 1%. The German sportswear maker said Monday that more than 60% of its products will be made with sustainable materials in 2021 , in a bid to expand its lineup of eco-friendly apparel.