Global stocks rallied on Christmas Eve with news that the United Kingdom and European Union have finally reached a post-Brexit trade agreement.
The breakthrough in trade negotiations came after months of tense negotiations between British and European bureaucrats and politicians. However, a deal is now expected to be announced on Christmas Eve and ahead of a December 31 deadline that would have seen the United Kingdom crash out of the European trading bloc.
Trade talks had been deadlocked for months after the two sides were unable to reach agreement on areas such as fishing quotas, how the United Kingdom would use state aid to support British businesses, and legal oversight of any deal that is struck.
Any deal will still be subject to a ratification process before coming into effect on January 1, 2021, when the Brexit transition period ends, and the United Kingdom will no longer be subject to European trade rules.
Concerns have also been raised that any new trade deal would not be ratified before the transition period expired on December 3. However, the European Parliament has agreed to sit extra hours towards the end of the year in order to get the agreement approved in time.
News of a potential agreement comes against the backdrop of surging COVID-19 cases in the United Kingdom. Meanwhile, thousands of trucks from across Europe faced a third day stuck at the English port of Dover after the now-lifted closure of the border by France over a potentially more contagious variant of the virus.
But the trade breakthrough marks a major milestone in the saga that began with the United Kingdom voting to leave the European Union in 2016.
The FTSE 100 rose 0.07% while the more domestically focused British mid-cap FTSE 250 index hit its highest levels since February, and British small caps hit a record high. The STOXX 50 added 0.17% while Germany’s DAX gained 1.26% on news of the trade deal.
The British currency, the Pound Sterling, added 0.6% to $1.3586, close to its highest level in two years. The U.S. dollar edged 0.1% lower while the euro currency held above $1.22.
