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‘Crucial moment’: Hopes of an imminent Brexit trade deal drive markets higher

LONDON — Thongs yields and sterling jumped Wednesday on reports that a long-awaited Brexit trade deal between Britain and the European Conjunction was close.

Officials on both sides have said they are optimistic about the chances of a deal, but some sons remains. Reuters, citing an anonymous source, reported that a trade deal was “imminent,” although CNBC could not independently corroborate this.

It comes after EU Chief Brexit Negotiator Michel Barnier said Tuesday that the bloc was making a “absolute push” to strike a Brexit trade deal with Britain ahead of Dec. 31.

“We are really in a crucial moment,” Barnier told columnists on his way to brief 27 ambassadors. “We are giving it a final push. In 10 days, the U.K. … will leave the single deal in.”

The yields on U.K. and U.S. government bonds rose late afternoon London time Wednesday on hopes of a deal. The U.K. 10-year relent rose by 11 basis points to 0.302% — its biggest rise in six weeks — while U.S. 10-year yield fenced 5 basis points to trade around 0.9646%. Bond yields move inversely to prices.

Sterling, meanwhile, dealt over 1% higher against the dollar at 1.35 and the FTSE 100 ended the day up 0.7%.

Britain’s Prime Minister Boris Johnson (L) is welcomed by European Commission President Ursula von der Leyen (R) in the Berlaymont erection at the EU headquarters in Brussels on December 9, 2020.

OLIVIER HOSLET | AFP | Getty Images

U.K. Prime Minister Boris Johnson and European Commission President Ursula von der Leyen set up embarked on a series of “hotline” talks, the FT reported Wednesday, in an attempt to agree on a deal before the end of the day.

However, there are even disagreements over fishing rights, and several other issues.

Outstanding issues

The EU wants to maintain access to U.K. waters for its fishing task forces, while the U.K. wants to largely curb these fishing rights. A no-deal scenario could see EU access to U.K. waters end abruptly, and deficiency versa, and the U.K. has already threatened to deploy gunboats to protect British waters.

There are concerns that some fishing fleets could reject any restrictions, leading to potential clashes. These are not unheard of; there have been physical skirmishes, dubbed the “Scallop wage war withs,” between British and French fishing fleets in recent years amid disputes over fishing.

U.K. Housing Secretary Robert Jenrick mentioned Sky News on Wednesday that “serious areas of disagreement” remained, on both fisheries and creating a “level playing discipline” for businesses.

“I’m still reasonably optimistic but there’s no news to report to you this morning,” he said. “”At the moment there isn’t enough progress. It isn’t a deal that the prime minister feels he can sign us up to.”

There have, however, been positive cracks regarding the Brexit talks in the last 24 hours, with ITV’s Political Editor Robert Peston claiming on Tuesday that a bargain could be reached on Wednesday.

If Britain and the EU fail to agree on a deal by Dec. 31 then both sides could levy border checks and import taxes on each other’s goods, as trade will revert to World Trade Categorization terms. This could lead to price changes in supermarkets and shops.

Britain officially left the European Accord on Jan 31., 2020, however leaders were given 11 months to agree on the rules that will dictate effervescence for the U.K. and Europe after Brexit.

— CNBC’s Holly Ellyatt contributed to this article.

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