European Stocks Rise as Brexit Talks, Vaccine Outweigh Lockdowns

European shares gained on Monday as optimism about a post-Brexit trade deal, and the impending deployment of the first vaccine in the U.S., outweighed concerns over new virus restrictions.

The Stoxx 600 Europe Index advanced 0.4% by the close in London, led by retail and banking shares. The energy sector slumped after OPEC cut forecasts for oil demand again.

The European Union’s chief negotiator, Michel Barnier, told a private meeting of ambassadors that a trade deal with the U.K. could be completed as soon as this week, but there are still significant differences to be bridged. Goldman Sachs Group Inc. strategists said their “base case remains that a “thin” free-trade agreement will be reached before the end of the year.”

“Brexit deadlines keep being pushed forward and it’s good news that they’ve decided to keep talks alive, although our scenario is that there will be a no-deal,” said Ricardo Gil, head of asset allocation at Trea Asset Management in Madrid.

European Stocks Rise as Brexit Talks, Vaccine Outweigh Lockdowns

U.K. lenders including NatWest Group Plc and Lloyds Banking Group Plc, and homebuilders like Bellway Plc and Persimmon Plc were among the biggest gainers in Europe today amid hopes of a trade deal. The FTSE 100 index underperformed as gains in the pound weighed on its biggest dollar-earners, such as spirits giant Diageo Plc. The FTSE 250 Index advanced 0.7%.

While the U.S. started administering the first Covid-19 vaccines, European governments are tightening restrictions as cases surge. London will be placed under England’s toughest coronavirus restrictions from Wednesday. The Dutch government is expected to lay out extra measures on Monday and Ireland is facing the possibility of more curbs next month after an easing in December. Germany is set to enter into hard lockdown Wednesday.

Investors will also be watching the U.S. Federal Reserve’s last rates decision of the year Wednesday, with economists expecting it to link the future of asset purchases to measures of employment and inflation without taking immediate action to alter the pace or composition of bond buying.

“This week, markets will also be looking at the Fed’s meeting and most investors are already thinking of year-end and are not willing to make big changes on their portfolios, ” said Trea Asset Management’s Gil.

Among individual movers, AstraZeneca Plc tumbled after it announced a $39 billion deal for rare-disease specialist Alexion Pharmaceuticals Inc. But Poland’s CD Projekt SA was the worst performer in the Stoxx 600 after a slew of technical glitches in its long-awaited Cyberpunk 2077 game.

©2020 Bloomberg L.P.

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