Stocks extend record rally, sterling endures rough week

NEW YORK (Reuters) - A year-end rally in global equity markets extended gains on Friday, helped by data showing relatively strong U.S. growth, while sterling posted its worst week in more than two years on concerns over how Britain will leave the European Union.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, December 19, 2019. REUTERS/Staff

The dollar firmed and U.S. Treasury yields rose after the Commerce Department said gross domestic product increased at a 2.1% annualized rate in the third quarter, as expected, with consumer spending coming in stronger than previously reported.

MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.33% to a record high, while Wall Street's three key equity indexes also notched new intraday and closing highs.

A preliminary U.S.-China trade deal and the Federal Reserve’s increase of short-term liquidity in the repo market have allowed risk assets to gain, said Yousef Abbasi, global market strategist at INTL FCStone Financial Inc in New York.

“The deliverance of Phase One of a trade deal and the Fed getting ahead of any potential systemic-type issues has cleared the path for this market to inch higher,” Abbasi said. “There isn’t anything that can shift sentiment dramatically.”

U.S. President Donald Trump spoke with Chinese President Xi Jinping and claimed progress on issues from trade to North Korea and Hong Kong, but China said Xi accused the United States of interfering in its internal affairs.

The benchmark S&P 500 extended its run of record highs to seven straight sessions, its longest streak in more than two years.

The Dow Jones Industrial Average .DJI rose 78.13 points, or 0.28%, to 28,455.09. The S&P 500 .SPX gained 15.85 points, or 0.49%, to 3,221.22 and the Nasdaq Composite .IXIC added 37.74 points, or 0.42%, to 8,924.96.

European shares also rallied, with the pan-European STOXX 600 index .STOXX rising 0.80%. Indexes in Frankfurt .GDAXI and Paris .FCHI made similar gains in thin trading.

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Emerging market stocks rose 0.08%.

Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added a sliver, having risen 1.2% so far this week and almost 5% this month.

Some data reminded investors of potential weak spots in the world economy.

The mood among German consumers deteriorated unexpectedly heading into January, a survey showed, suggesting that household spending in Europe’s largest economy could weaken at the beginning of next year.

Germany's 10-year government bond yield DE10YT=RR held steady near six-month highs on rising economic optimism.

The benchmark 10-year Treasury yield US10YT=RR rose 1 basis point to 1.9206%.

Sterling GBP= traded at $1.3004, down 0.02% on the day after a sharp reversal that left it down 2.4% for the week, its worst weekly fall since October 2017. Former Prime Minister Theresa May's leadership was questioned at the time, leading the pound to drop 2.5%.

Overnight the pound slipped to below $1.30, a dramatic drop from a 19-month peak of $1.3514 after British Prime Minister Boris Johnson used his sweeping election victory last week to revive the risk of a hard Brexit.

Johnson won approval for his Brexit deal in Parliament, the first step toward fulfilling his election pledge to deliver Britain’s departure from the EU by Jan. 31 and setting December 2020 as a hard deadline to reach a trade agreement.

The dollar index .DXY rose 0.32%, with the euro EUR= down 0.4% to $1.1076. The Japanese yen JPY= weakened 0.08% versus the greenback at 109.47 per dollar.

Oil fell on the day, though prices posted a third straight weekly gain as the easing of U.S.-Chinese trade tensions has boosted business confidence and promises future global growth.

Brent LCOc1 settled down 40 cents at $66.14 a barrel, while West Texas Intermediate crude CLc1 slid 74 cents to settle at $60.44 a barrel.

U.S. gold futures GCcv1 settled 0.2% lower at $1,480.90 an ounce.

Reporting by Herbert Lash in New York; Additional reporting by Tom Wilson in London; Editing by Will Dunham and Leslie Adler