Pound gets Brexit boost as equities slip

European equity markets ended a volatile session lower Wednesday as the pound sterling gained on hopes of some kind of Brexit deal, dealers said. An attempt by Wall Street at the opening to recoup the week's losses fizzled out, weighing on European stocks which also gave up their earlier gains. The pound had a rollercoaster day as Prime Minister Theresa May defended her divorce deal with the EU before rowdy lawmakers and tried to win the backing of her splintered cabinet. But reports that May was to make a statement shortly after the markets' close pushed the British currency firmly into positive territory. "Markets have rallied on news that a Brexit deal has been reached but there's still a long way to go," said Chris Turner, an analyst at ING. "We still think 'no deal' will be avoided in the end," he said. - 'Hot tin roof' - "The pound is behaving like a cat on a hot tin roof," said David Lamb, head of dealing at Fexco Corporate Payments, as the British currency flitted between gains and losses over the day. Eurozone stocks meanwhile suffered from a damaging standoff between Italy and the EU over Rome's budget as well as scepticism surrounding Brexit. "Uncertainty around Italy and Brexit are weighing on sentiment," said CMC Markets analyst David Madden. Italy's populist government defied the European Commission by sticking to a big-spending budget plan, risking financial sanctions in a high-stakes standoff that could spell fresh trouble for the eurozone. Powerhouse Germany's economy is also a worry after it shrank 0.2 percent in the third quarter. The reversal was the first fall in GDP since early 2015 and worse than forecast by analysts after months of troubling economic indicators. "The reputation of the invincible strong man (or woman) of Europe has received some scratches," commented ING Diba bank economist Carsten Brzeski. - 'Aggressive momentum' - Oil prices, meanwhile, clawed back some of the sharp losses this week seen on oversupply fears just as demand falters in the face of the China-US trade war and easing economic growth. Prices are, however, still more than a fifth down from their four-year highs seen in early October. "The dramatic selling across the oil markets in recent days has come to a brief pause," said Jameel Ahmad, head of market research at FXTM, "but many remain stunned by the acceleration in aggressive momentum that has transpired over the past couple of sessions". Energy giant Russia, which has been cooperating with OPEC on production cuts, said Wednesday that it had agreed with the cartel's members to keep a close eye on the oil market at a meeting in Abu Dhabi at the weekend. "We agreed to monitor the market in November," Russia's Energy Minister Alexander Novak said on the margins of an ASEAN meeting in Singapore. "We have the necessary tools to deal with any signs of a serious crisis," he said, quoted by the RIA news agency. - Key figures around 1640 GMT - London - FTSE 100: DOWN 0.3 percent at 7,033.79 points (close) Frankfurt - DAX 30: DOWN 0.5 percent at 11,412.53 (close) Paris - CAC 40: DOWN 0.7 percent at 5,068.85 (close) Milan - FTSE MIB: DOWN 0.8 percent at 19,077.47 (close) EURO STOXX 50: DOWN 0.6 percent at 3,205.36 New York - Dow: DOWN 0.3 percent at 25,209.21 Pound/dollar: UP at $1.3026 from $1.2977 late Tuesday Euro/dollar: UP at $1.1319 from $1.1290 Dollar/yen: DOWN at 113.78 yen from 113.81 yen Tokyo - Nikkei 225: UP 0.2 percent at 21,846.48 (close) Hong Kong - Hang Seng: DOWN 0.5 percent at 25,654.43 (close) Shanghai - Composite: DOWN 0.9 percent at 2,632.24 (close) Oil - Brent Crude: UP $1.46 at $66.93 per barrel Oil - West Texas Intermediate: UP $1.15 cents at $56.84 burs-jh/pma