Stocks Rally, Dollar Drops Tracking Virus, Stimulus, Brexit Hopes

Stock markets rallied Wednesday on fresh hopes for a U.S. economic stimulus deal and a Brexit trade deal, with sentiment additionally boosted by Covid-19 vaccine rollouts.

The dollar faltered, however, as a surge in virus cases and lockdown measures continued to drive a tug-of-war between long-term optimism and near-term pain.

The pound built on recent gains as British and European negotiators press on with talks on a post-Brexit trade deal.

Traders were awaiting the conclusion Wednesday of the Federal Reserve's latest policy meeting, hoping for some guidance on its plans for monetary policy in the new year.

"Stock markets were off to a promising start in Europe and Wall Street is poised for small gains as negotiations on both sides of the pond see much needed progress," noted Craig Erlam, analyst at Oanda trading group.

After months of stuttering talks between lawmakers in Washington, there appear to be signs of progress on a new rescue package for the world's top economy.

Hopes for a breakthrough helped fire a rally on Wall Street on Tuesday, with all three main indices ending more than one percent higher.

That helped Asia and Europe to post healthy gains, with Frankfurt up 1.6 percent around the half-way stage.

Hopes that the economy can get back on track next year got a lift Tuesday when the European Medicines Agency said it had brought forward a meeting to decide on authorizing the Pfizer-BioNTech vaccine by more than a week to December 21.

The vaccine is already being administered in Britain, the U.S. and Canada.

That came as the US Food and Drug Administration recommended experts give the go-ahead later this week to a second vaccine, produced by Moderna.

"Progress over an economic relief package in Washington, Brexit deal optimism that could settle by week's end, and the likely seamless rollout of multiple highly effective vaccines have mixed to paint trading screens Christmassy green," said Axi strategist Stephen Innes.

The gains came "despite the numerous headwinds, both from the virus' spread and the risk of increasingly tighter mobility restrictions," he added.

The need for a big rollout of the vaccine has been laid bare by soaring infection and death rates around the world, which have led governments to impose strict containment measures leading into the Christmas holidays.

But Rodrigo Catril at National Australia bank noted: "Prospect of stricter lockdowns in Europe and US not enough to derail the positive vibes."

- Key figures around 1200 GMT -

London - FTSE 100: UP 0.9 percent at 6,573.28 points

Frankfurt - DAX 30: UP 1.6 percent at 13,573.05

Paris - CAC 40: UP 0.6 percent at 5,565.47

EURO STOXX 50: UP 0.8 percent at 3,549.59

Tokyo - Nikkei 225: UP 0.3 percent at 26,757.40 (close)

Hong Kong - Hang Seng: UP 1.0 percent at 26,460.29 (close)

Shanghai - Composite: FLAT at 3,366.98 (close)

New York - Dow: UP 1.1 percent to 30,199.31 (close Tuesday) 

Pound/dollar: UP at $1.3533 from $1.3457 at 2150 GMT

Euro/pound: DOWN at 90.09 pence from 90.36 pence

Euro/dollar: UP at $1.2200 from $1.2159

Dollar/yen: DOWN at 103.31 yen from 103.61 yen

West Texas Intermediate: FLAT at $47.64 per barrel

Brent North Sea crude: FLAT at $50.76 per barrel