European Shares Continue Rally on Brexit Hopes

European shares gained for a second day, which helped them extend a recovery from a big sell-off at the beginning of the week, after a report that Brexit trade deal could be made later in the day.

On Wednesday, European shares gained for a second day, which helped them extend a recovery from a big sell-off at the beginning of the week, after a report that a Brexit trade deal could be made later in the day. There was also a 0.3% increase in the pan-European STOXX 600 index in trade that had thinned due to the holidays, after experiencing a slump of 2.3% on Monday. However, even as the pound gained, the FTSE 100 continued to decline. A trade deal between the European Union and the United Kingdom could be made on Wednesday after there had been some progress made in negotiations over fishing rights.

Britain’s exit from the bloc is now just days away, as the transition period will come to an end on December 31st. However, the news of a possible deal did give British mid-caps a lift, along with the announcement of France ready to lift the blockade it had imposed on England because of the new fast-spreading strain of the coronavirus. They are now ready to reopen their borders that will allow trucks that were stranded to go in. A major part of the world decided to shut its doors to the island country after a new coronavirus strain was detected in the United Kingdom. 

This had prompted supermarket owners to warn about shortages in food supply, which ended up hammering stocks all over the board on Monday. Market analysts said that the current condition was pretty much to be expected at the year-end. The new COVID-19 strain has brought about a lot of caution amongst investors because it is difficult to say what it means. Therefore, it wasn’t smart to read a lot into small gains as yet, especially when they are just part of the recovery from one day’s losses. 

The STOXX 600 got most of its boost from Daimler, which had pushed up by 2.6%, after it was reported by Handelsblatt, the business newspaper that a stock market listing was being prepared by the German luxury carmaker of its truck division. Markets were also keeping an eye out on the latest news regarding the US stimulus deal, after Donald Trump, the US President threatened to not sign the long-awaited $892 billion coronavirus aid package. He stated that the number of checks for individuals was too low and the bill needs to be amended for increasing the said amount. The STOXX 600 is on the path to finishing the year down by 6%, even though it had made an impressive recovery from the COVID-19 fueled lows it had reached earlier in the year. 

Energy shares and banks have declined by more than 25% this year, which are linked to expectations of global growth, with uncertainty about Brexit only adding to the decline in lenders. The worst hit due to the pandemic were travel shares and they are set to end the year lower by 18%, which is their worst since 2008. On the other hand, the winners because of the work-at-home trend were technology stocks, and they have gained by 12% this year.

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