British midcaps rise on Brexit deal hopes

"The fishing side of Brexit negotiations may seem insignificant from an economic standpoint, but it has a political cost of compromising too easily." Broader European markets rebounded from a selloff this week on fears about the new virus variant in Britain after a deal was reached to restore critical trade links between the United Kingdom and other parts of Europe.

UK midcap stocks inched higher on Wednesday on hopes of a Brexit trade deal and France lifting a freight ban aimed at controlling the spread of a highly infectious new coronavirus variant. The domestically focused FTSE 250, considered a proxy for Brexit sentiment, added 0.5%, while the exporters-heavy FTSE 100 was flat as a rise in the pound hurt the dollar earners.

While the European Union and Britain struck a downbeat tone, investors clung to hopes of a trade agreement with ITV's political editor reporting of the possibility of the two sides striking a deal on Wednesday. The two sides are nearing a Dec. 31 deadline for a Brexit transition period, with deep rifts over fishing rights still remaining.

"There is a belief that a deal is close to being agreed," said Craig Erlam, senior market analyst at OANDA. "The fishing side of Brexit negotiations may seem insignificant from an economic standpoint, but it has a political cost of compromising too easily."

Broader European markets rebounded from a selloff this week on fears about the new virus variant in Britain after a deal was reached to restore critical trade links between the United Kingdom and other parts of Europe. In company news, British pub operator Marston's shares rose 5.5% after the company said it will operate Brains' 156 pubs in Wales in a deal that will save 1,300 jobs.

Cairn Energy surged 27.5% after winning an international arbitration case against the Indian government over a tax dispute.