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UK shares rise in first trading day after Brexit agreement


UK stocks led the way higher in Europe on Tuesday, the first London trading session since the Brexit agreement was reached on Christmas Eve.

London’s FTSE 100 gained 1.9 per cent in morning trade, with the mid-cap FTSE 250 rising 1.4 per cent.

Markets in London closed at lunchtime last Thursday, and while a deal was seen as “imminent” at that time, traders did not have a chance to react to formal sealing of the deal later that day. The market was closed on Monday for a bank holiday.

Sterling also ticked back up to $1.35 on Tuesday after falling in the previous session. It failed to hit its highs for the year above $1.36, with investors indicating that the UK-EU trade deal was largely priced in and remaining cautious given the deal does not cover big industries like financial services.

UK markets also missed out on a broad rally on Monday, which carried Germany’s Dax and Wall Street’s S&P 500 to new record highs.

European markets continued rising on Tuesday, helped by new US stimulus measures designed to prop-up the world’s largest economy. The Dax and France’s CAC 40 advanced by around 0.4 per cent on Tuesday.

Markets in Asia also climbed, with MSCI’s gauge of equity markets in the region rising 1 per cent. Japan’s benchmark Topix added 1.7 per cent, while Hong Kong’s Hang Seng and Australia’s S&P/ASX 200 gained 1 per cent and 0.5 per cent, respectively.

Investor sentiment was buoyed on Monday by Donald Trump agreeing to release hundreds of billions of dollars in pandemic spending. Mr Trump had previously refusing to sign the deal, which he had described as a “disgrace”.

“The agreement raises the outlook for the US economy before the new administration takes over and is positive for risk assets” such as stocks, said César Pérez Ruiz, chief investment officer at Pictet Wealth Management.

That optimistic outlook continued into Tuesday after the US House of Representatives passed a measure that would increase direct payouts to Americans from $600 a person to $2,000. The passage of the bill, which is supported by Mr Trump, throws the spotlight on the Republican-controlled Senate which has thus far resisted the increase.

Marcus Widén, economist at SEB, said the spectre of a larger stimulus programme was a factor that has helped to boost “confidence in the US economy and the risk appetite for 2021”.

Futures tracking the S&P 500 index rose 0.5 per cent on Tuesday, suggesting Wall Street’s benchmark index is set to build on the all-time high it set on Monday.

In Hong Kong, shares in Chinese technology groups rebounded following concerns of a regulatory crackdown on the sector. Alibaba, the ecommerce group, jumped nearly 6 per cent after falling 8 per cent a day earlier in the wake of a rare public rebuke by Chinese authorities targeting Ant Group, Alibaba’s payments-focused sister company, for alleged regulatory failings.

The moves by Beijing indicate a “turning tide in tech regulation, which we believe will be the industry’s biggest challenge in 2021”, added Mr Pérez Ruiz.

Internet and gaming company Tencent was also up 3.1 per cent.

Elsewhere in Asia, mainland China’s CSI 300 of Shanghai- and Shenzhen-listed shares slipped 0.4 per cent despite news that the EU and China were poised to sign a long-awaited business investment deal.

In commodities, oil continued to push higher on hopes that increased stimulus spending would boost the US economic recovery. Brent crude, the international benchmark, added 1.2 per cent to $51.44 per barrel. West Texas Intermediate, the US marker, was up 1.1 per cent to $48.15 per barrel.

The dollar, as measured against a basket of America’s trading peers, slipped 0.3 per cent on the prospect of more fiscal stimulus.



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