GLOBAL MARKETS-Brexit deal fuels sterling while stocks edge higher ahead of holiday

* Brexit trade deal buoys sterling, European stocks
* Investors wind down for Christmas break in bullish mood
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

(Updates with close of U.S. markets, adds commentary)
By April Joyner
NEW YORK, Dec 24 (Reuters) - The British pound rose on
Thursday as Britain and the European Union clinched a free trade
deal, while a global gauge of stocks edged upward amid investor
optimism toward economic growth.
Britain hammered out the final details of a narrow agreement
with the EU just seven days before it exits the trading bloc.
Sterling GBP=D3 momentarily extended its climb against the
dollar on the news, rising as much as 0.94%, but then pared
gains. Analysts said the pound's 5% rally since early November
meant that much of the Brexit relief had already been priced
into the currency. Britain also faces challenges from a new
variant of COVID-19. Still, the pound rose 0.27% to $1.3537.
"The big news here is that the worst-case scenario didn't
happen," said Jason Brady, chief executive of Thornburg
Investment Management. "There are still some big challenges in
the UK economy, and they're doing a pretty aggressive lockdown,
which is going to have economic implications."
The trade deal helped European equities edge higher as well.
The STOXX index .STOXX rose 0.12%.
U.S. stocks also advanced slightly in thin volume ahead of
the Christmas holiday as investors maintained hopes of economic
recovery, despite blocked attempts in Congress to alter a $2.3
trillion coronavirus aid and government spending package.
President Donald Trump had previously stated that he might not
sign the bill without significant changes. Optimism about a full-scale roll-out of COVID-19 vaccines
next year has largely kept stocks buoyed in despite the delays
in further stimulus, said Arnim Holzer, macro and correlation
defense strategist at EAB Investment Group. Moreover, he added,
investors still expect greater fiscal spending to come under
President-elect Joe Biden next year.
"The first thing to recognize is that this is not a
full-blown stimulus," he said. "It's really a stop-gap measure.
President-elect Biden has stated we still have more work that
needs to be done."
MSCI's world equity index .MIWD00000PUS ticked up 0.19%.
On Wall Street, the Dow Jones Industrial Average .DJI rose
70.04 points, or 0.23%, to 30,199.87, the S&P 500 .SPX gained
13.05 points, or 0.35%, to 3,703.06 and the Nasdaq Composite
.IXIC added 33.62 points, or 0.26%, to 12,804.73.
Trading in U.S. stocks and bonds ended early on Thursday,
and the markets will be closed on Friday for Christmas.
Among currencies, the dollar index =USD shed earlier
losses to rise 0.06% as the pound cut its gains. The euro
EUR=EBS dipped 0.05% to $1.2181. U.S. Treasury yields dropped in light volume. Benchmark
10-year Treasury notes US10YT=RR rose 9/32 in price to yield
0.9264%, from 0.955% late on Wednesday. Optimism over the Brexit trade deal kept oil prices steady,
despite lingering concerns about a new variant of COVID-19.
Brent LCOc1 settled at $51.29 a barrel, up 0.18%, while U.S.
crude CLc1 edged up 0.23% to $48.23 a barrel. Gold prices XAU= rose as investors remained optimistic
about U.S. stimulus and the Brexit trade deal kept the dollar's
gains in check. Spot gold XAU= added 0.3% to $1,877.77 an
ounce. Copper CMCU3 prices were little changed, near their
highest levels since 2013, while other industrial metals rose.