European stocks retreat, sterling skids

European stocks slid from record highs and sterling dropped amid reports that Britain's prime minister was ready to play rough in Brexit talks.

U. S.- China trade optimism and reassuring economic data from China had driven Asia and the main emerging market stocks index to 18- month highs overnight, but the greens immediately turned red when London, Frankfurt and Paris opened.

The FTSE 100 . FTSE, which had seen its best day in nearly a year, dropped 0.2% and the UK's domestically focused mid- cap index . FTMC plunged 1.6%, after reports UK PM Boris Johnson would use his control of parliament to ban any extension of the Brexit transition beyond 2020.

The pound GBP= D3 fell 1% to back below $ 1.32 and nearly 2% under Thursday and Friday's post- election highs of over $ 1.35.

The broader European STOXX 600 dropped 0.6%, hurt by a profit warning from consumer goods giant Unilever ( ULVR. L) that sent its shares down nearly 6%.

"So much for pragmatism," J. P. Morgan's Malcolm Barr said, referring to reports of Johnson's hard- line Brexit stance. "We have put the risk of a nodeal end to the transition at 25%, a number we regard as uncomfortably high."

Britain's political wrangling couldn't keep Asian stocks from joining a global rally, however, as more U. S. officials confirmed phase one of a trade deal with China was done, although the details remain unpublished.

The preliminary deal between Washington and Beijing reached last week will double U. S. exports to China, White House adviser Larry Kudlow told Fox News. The United States will also reduce some tariffs on Chinese goods under the agreement.

Shanghai, Hong Kong and Seoul all gained more than 1% and MSCI's allcountry index . MIWD00000PUS set a record high, putting its gains for 2019 at almost 23%, its best year in a decade and the fourth- best year ever.

The return

of

Brexit angst meant safety trades were back in Europe. Most 10- year euro zone bond yields were around two basis points lower DE10YT= RR, NL10YT= RR, FR10YT= RR. Germany's 10- year yield was at - 0.30%.

In commodity markets, oil was near three- month highs in anticipation of growing demand from the world's biggest economies. [ O/ R] Brent crude LCOc1 held steady at $ 65.32 per barrel, after climbing. Gold XAU= rose to $ 1,477 per ounce.

The Australian dollar AUD= D3 was under pressure after minutes of the central bank's December policy meeting showed it might cut interest rates again in February if needed.

Wall Street futures pointed to a subdued start in New York later after a record- high finish.

"People are looking to close the year on a good note," said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore. "I think that these are far more opportunistic than they are conviction trades, so they tend to be a little bit more prone to taking profits."