By Shashwat Awasthi
(Reuters) - London's FTSE 100 declined for the second straight session on Tuesday, as traders booked year-end profits after the index's best run in three years and as a stronger pound hit shares of exporter firms.
The FTSE 100 <.FTSE>, which rose for 11 consecutive days earlier this month, fell 0.6% as a stronger sterling dragged exporter stocks such as BAT <BATS.L> and AstraZeneca <AZN.L> lower.
The mid-cap FTSE 250 <.FTMC> edged 0.2% lower in thin trading, as most investors were away during another holiday-shortened week.
"As the New Year holiday is falling mid-week, I suspect we will have to wait until Monday to see which way financial markets wish to throw the kitchen sink as the new budget year begins," OANDA analyst Jeffrey Halley said.
After a year of topsy-turvy swings in sentiment around the U.S.-China trade dispute, global central bank policy, British politics and Brexit, receding worries on all fronts have fuelled sharp gains for UK markets in December.
Tensions between the United States and China have eased and hopes of concrete progress on the trade front were bolstered on Monday when White House trade adviser Peter Navarro said the countries would likely sign a deal early next year.
British Prime Minister Boris Johnson's election victory and prospects of a clear process towards leaving the European Union on Jan. 31 have been cheered, as has the stance of the U.S. Federal Reserve and its peers to hold interest rates steady for the time being.
This cocktail helped the FTSE post its best month since June and a 12% annual gain - its biggest since 2016. The mid-caps enjoyed their best month since January and surged 25% for the year, their best performance since 2013.
Investors will now shift focus to 2020, looking for the finer details of a Phase 1 U.S.-China trade deal, as well as Britain's negotiation of a free trade agreement with the European Union.
UK markets will remain closed for New Year's Day on Wednesday.
(Graphic: European stocks in 2019 click, https://fingfx.thomsonreuters.com/gfx/mkt/13/458/458/stocks.png)
(Reporting by Shashwat Awasthi in Bengaluru; Editing by Rashmi Aich and Alex Richardson)