Brexit deal relieves global stock markets

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Pound sterling strengthens amid lifted investment sentiment on final deal on Brexit

By Anna J. Park

As news of the United Kingdom and the European Union finally reaching a post-Brexit trade deal broke Christmas Eve, global stock markets responded with signs of relief.

With the UK government and the EU finally seeing eye-to-eye on how to apply new trade rules before the expiration of the transition period, U.S. stock markets reacted with a slightly lifted investment sentiment.

Celebrating the Christmas holidays, the markets ended a few hours earlier than usual ― 1 p.m. Eastern time ― with the Nasdaq closing up 0.26 percent, the S&P 500 up 0.35 percent and the Dow Jones, 0.23 percent. The moves came despite the continually soaring numbers of confirmed patients and deaths due to COVID-19 there.

Hours before the news of the deal hitting the media, the UK's FTSE 250 index also closed at a 10-month high on positive expectations, up 1.15 percent in the Christmas Eve trading session.

With the Brexit trade deal being finalized ― the UK will maintain zero-tariff status with European Union ― the pound rose against both the U.S. dollar and the euro.

Market reports advise investors to increase their buying of the pound as well as investing in British stocks, as the deal along with the impact of COVID-19 vaccines could help the UK strongly rebound next year.

Goldman Sachs stated “the UK is a buy,” predicting that the British economy will log growth of about 7 percent in 2021, and 6.2 percent in 2022. The bank added, given next year's strong growth, UK stocks are currently estimated at a 10 percent to 15 percent discount compared to European equities. It also predicted the pound to continue its upward moves in the near future.