(Bloomberg) -- European stocks erased earlier declines over renewed worries over Brexit talks as energy and mining shares surged.
The Stoxx Europe 600 Index closed down less than 0.1%. The benchmark trimmed a loss of as much as 0.6% as miners surged after Brazilian iron ore giant Vale SA lowered its output guidance and oil majors jumped.
U.K. homebuilders and retailers declined after European Union's chief negotiator Michel Barnier told envoys the outcome of post-Brexit trade deal talks is still too close to call. Concerns over negotiations weighed on the optimism over the U.K. becoming the first western country to approve a Covid-19 vaccine, with its regulator clearing Pfizer Inc. and BioNTech SE's shot. Investors are carefully monitoring Brexit talks, with the U.K. and EU teams hoping that a trade agreement can be reached on Friday or over the weekend.
Some investors and strategists expect the ending of post-Brexit trade negotiations to boost appetite for U.K. equities, which have long been unloved by the market.
“From a macro and geopolitical perspective, many uncertainties remain from the outcome of Brexit negotiations to the timing of the withdrawal of Covid-19 support measures,” said Alex Wright, a portfolio manager at Fidelity International. “The conclusion of Brexit negotiations and the roll-out of vaccines should lift some of the uncertainty that has plagued U.K. equities.”
Wright said that Fidelity International has increased exposure to car distributors, specialist retailers and housebuilders, while selling U.K. oil majors and being underweight mainstream banks.
The Stoxx Europe 600 Basic Resources Index was up 1.6%, rising to the highest since April 2019. Rio Tinto Plc and BHP Group Plc each added more than 4%. Vale, the world's second-largest iron ore producer, reduced its output guidance for this year and delivered a 2021 projection that fell short of some expectations, giving further support to surging prices of the steelmaking ingredient.
Energy stocks also advanced as oil gained after a surprise decline in U.S. crude inventories offset supply concerns as the market awaits an OPEC+ decision on output later this week. BP Plc and Royal Dutch Shell Plc were among the top performers.
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