What to watch: Brexit rally lifts pound and UK stocks despite tighter lockdowns

Kumutha Ramanathan
·Contributor
·3-min read
Flags of the United Kingdom and the European Union. UK Flag and EU Flag. British Union Jack flag.
Flags of the United Kingdom and the European Union. (Source: Getty Creative)

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and around the world.

Sterling shoots higher

The pound continued to rise on Thursday with Britain and the EU within touching distance of an historic post-Brexit trade deal.

UK prime minister Boris Johnson was due to hold a final call with European Commission president Ursula von der Leyen on Thursday to finalise the deal. He is reported to be planning to confirm the free-trade agreement in a speech from 10 Downing Street.

Negotiations went on into the early hours of the morning in Brussels overnight, with officials continuing to thrash out the final details and draft of the UK’s divorce.

Sterling was up 0.5% against the dollar (GBPUSD=X) at close to $1.36 and 0.3% against the euro to above €1.11 (GBPEUR=X) in early trading in London.

WATCH: Johnson Makes Last-Ditch Brexit Push

Travel stocks among FTSE gainers

Travel stocks on London’s FTSE (^FTSE) have made a dramatic comeback after plummeting earlier this week as a new UK virus strain dented hopes of the industry opening up further.

Despite Wednesday’s COVID-19 news forcing parts of the nation into stricter Tier 4 restrictions and travel curbs worldwide for the UK, reports of a Brexit deal materialising as early as Thursday sent stocks higher.

READ MORE: China becomes latest to ban UK travellers as UK limits South Africa flights

TUI (TUI.L) was boosted 5% at around 10.08am in London. EasyJet (EZJ.L) also gained 3.9%. IAG (IAG.L) was up 2.8%.

TUI shares have seen a dramatic rebound following news of a Brexit deal coming soon. Chart: Yahoo Finance
TUI shares have seen a dramatic rebound following news of a Brexit deal coming soon. Chart: Yahoo Finance

Banking shares see a Brexit uptick

Banking stocks were also among the biggest gainers on the FTSE (^FTSE) on Thursday, swept up in the Brexit deal optimism.

At around 10.13am in London, Lloyds (LLOY.L) was up 4%, Barclays (BARC.L) gained 3.2% and Natwest (NWG.L) jumped 2.1%.

Barclays is among the FTSE gainers on Thursday, alongside its other banking peers. Chart: Yahoo Finance
Barclays is among the FTSE gainers on Thursday, alongside its other banking peers. Chart: Yahoo Finance

Despite the immediate Brexit optimism, some underlying concerns loom large for firms, particularly the economic fallout of COVID-19 and a new strain that has forced tighter lockdowns and hit UK stocks earlier this week.

The fate of banks, alongside housebuilders and other so-called cyclical stocks, are typically closely linked to the fortunes of the wider domestic economy as a whole.

If this deal is done (and it won’t be the end of Brexit completely) then a lot of the cloud that hangs over the UK economy is removed – and banks like Lloyds and housebuilders stand to benefit from a more positive outlook on the UK economy,” said Chris Beauchamp, chief market analyst at IG.

UK and European stocks jump on Brexit deal optimism

UK and European stocks headed higher on Thursday, as investors’ hopes grew of a Brexit trade deal being announced within hours.

The FTSE 100 (^FTSE) opened higher 0.2% in London, on a half-day of trading ahead of the Christmas break. The mid-cap FTSE 250 (^FTMC), seen as a barometer of Brexit developments, was up 0.6%.

US markets will also close early today due to the holiday. S&P futures (ES=F) were higher 0.2% and Dow Jones (YM=F) was also up 0.3%. The Nasdaq (NQ=F) gained 0.1%.

Asian markets were mixed at market close. Japan’s Nikkei (^N225) gained 0.5% at market close, the Hong Kong Hang Seng (^HSI) was up 0.2%, and the Shanghai Composite (000001.SS) was down 0.6%. South Korea’s KOSPI (^KS11) headed up 1.7%.

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-With additional reporting by Tom Belger