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European stocks rise on Brexit progress and U.S. stimulus hopes

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European stocks made modest gains on Wednesday, as the European Union reported progress toward a post-Brexit trade deal.

The pan-European Stoxx 600
SXXP,
+0.63%

rose 0.6%, the German DAX
DAX,
+1.28%

was 1.2% up, while the U.K.’s FTSE 100
UKX,
+0.63%

also enjoyed gains, as it rose 0.7%.

Across the Atlantic, signs of progress over a new U.S. coronavirus stimulus package also buoyed investors. A bipartisan group of lawmakers unveiled a new proposal earlier this week and a group of Democratic and Republican leaders met face-to-face on Tuesday night — a move welcomed in the markets. Senate Majority Leader Mitch McConnell said the group had agreed lawmakers should not leave Washington for the holiday break without a deal on coronavirus aid and fiscal 2021 government funding.

Investors are also patiently awaiting an update from the Federal Reserve on its bond-buying program, after U.S. retail sales fell 1.1% in November — economists polled by MarketWatch had forecast a 0.4% decline.

Read: U.S. stocks flatline on decision day for Fed and fiscal stimulus

The pound
GBPUSD,
+0.30%

continued its climb, rising 0.4% to $1.3513 after European Commission President Ursula von der Leyen said there was “a path to an agreement now.” She added that the U.K. and EU had “found a way forward on most issues,” but the discussion on fisheries was still “very difficult,” according to the Twitter
TWTR,
+3.54%

account of EU spokesman Daniel Ferrie. U.K. and EU leaders had promised to “go the extra mile” on Sunday and extend talks into this week. A deal must be agreed and ratified by Dec. 31 to avoid a ‘no-deal’ scenario.

“European markets have opened higher this morning buoyed by the twin prospect of a U.S. stimulus deal coming to pass alongside the prospect of a U.K.-EU trade deal, with the only unknown as to which one might get agreed first,” said CMC Markets analyst Michael Hewson.

As Germany entered a new lockdown on Wednesday, there were some encouraging signs for Europe’s largest economy in the form of economic data. The closely-followed flash composite purchasing managers index climbed to 52.5 — a two-month high.  

“December’s ‘flash’ PMI reassuringly showed that German economy still on a relatively stable platform, at least up until the middle of the month. However, the impending harder lockdown threatens to put pay to some of the resilience we have seen so far, with more sectors set to be impacted by the new tougher virus containment measures,” said IHS Markit associate director Phil Smith.

However, Germany’s Ifo Institute cut its 2021 economic growth forecast for the country from 5.1% to 4.2%, it said on Wednesday.

European banks were in the spotlight, as the European Central Bank lifted a ban on dividend payments but maintained restrictions on payouts. French bank BNP Paribas
BNP,
-2.64%

fell 2.7% and Dutch bank ABN Amro
ABN,
-1.80%

slipped 1.9%.

Shares of Altice Europe
ATC,
+23.25%

soared 23%, as the French telecom and cable group said its billionaire founder Patrick Drahi raised his offer to take the company private to €5.35 per share from €4.11.

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