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London's FTSE closes higher as Brexit talks progress

WATCH: Pound jumps as UK agrees to drop controversial Brexit legislation

The FTSE (^FTSE) reversed losses from earlier on Tuesday following news that the UK government would drop controversial legislation that would break the Brexit withdrawal deal.

On the continent, European markets suffered modest losses throughout trading as investors became weary with rising COVID-19 cases and wait for a breakthrough in US stimulus plans that could revive the economy.

The FTSE 100 (^FTSE) closed marginally higher by 0.1%. The DAX (^GDAXI) declined by 0.1% in Frankfurt and CAC 40 (^FCHI) slid down 0.2%.

There were muted moves in US markets. The S&P (^GSPC) was up 0.1%. Dow Jones (^DJI) gained 0.3% and the Nasdaq (^IXIC) dropped 0.1%.

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The UK has now officially become the first western country to begin coronavirus vaccinations, using the Pfizer (PFE)/BioNTech (BNTX) shot. Margaret Keenan, who turns 91 next week, was given the first of 800,000 doses that will be administered in the coming weeks across the nation.

WATCH: Margaret Keenan speaks after receiving first COVID-19 jab

Despite the vaccination campaigns that will begin across the world, the winter will be long. Dr. Anthony Fauci, director of the US National Institute of Allergy and Infectious Diseases, warned on Monday that the Christmas holiday “could be even more of a challenge than what we saw with Thanksgiving.”

Denmark has also announced a partial lockdown from 9 December following a surge in cases there. France is still far from its goal of reducing the number of COVID-19 cases to 5,000 a day.

Chart: Yahoo Finance
Chart: Yahoo Finance

The pound momentarily gained on Tuesday after UK cabinet minister Michael Gove confirmed the government would drop a controversial legislation that would break the Brexit withdrawal deal.

READ MORE: Pound jumps as UK agrees to drop controversial Brexit legislation

Analysts are hoping a deal can be done.

“A deal this week is possible,” said Craig Erlam, senior market analyst at OANDA Europe. “Significant differences remain, we're repeatedly warned, the one difference now being the time left on the clock. The nerves are well and truly creeping in,” he added.

WATCH: Johnson heads to Brussels as time runs out for Brexit deal

Investors are also watching to see if US policymakers can move forward in passing additional pandemic stimulus. The US Congress is expected to vote this week on a one-week stopgap funding bill. It will give negotiators time to achieve a deal, which is “badly needed,” said Aslam.

“The Fed has made it clear that without this, the US economy is highly likely to continue to struggle as US states are still putting more restrictive measures that are influencing the economic activity,” he added.

“COVID-19 restrictions are putting the smaller to big size business at far greater risk now, and if the economic package isn’t approved soon enough, it is likely that we will see more carnage in the equity market despite the vaccine approval. Of course, for a very short period, we may see the equity markets talking to its all-time high, but that optimism isn’t likely to last.”

Japan’s Nikkei (^N225) lost 0.3%, the Hong Kong Hang Seng (^HSI) fell 0.8%, and China’s Shanghai Composite (000001.SS) fell 0.2%. South Korea’s KOSPI (^KS11) also headed lower 1.6%.

WATCH: 'There is plenty of market opportunity left' heading into 2021 – Global Head of Equities