Sterling rallied Monday after Britain and the European Union agreed to extend talks on a post-Brexit trade deal past a self-imposed deadline, while Asian markets were mixed as surging coronavirus infections tempered vaccine optimism.

Prime Minister Boris Johnson and EU chief Ursula von der Leyen said after a crisis call that they would "go the extra mile" to find common ground in long-running talks.

"Our negotiating teams have been working day and night over recent days," said von der Leyen, reading a joint statement agreed with Johnson as their Sunday deadline passed, with sticking points on issues including fishing rights and fair trade regulations.

"We have accordingly mandated our negotiators to continue the talks and to see whether an agreement can even at this late stage be reached."

The news gave the pound a boost against the dollar and euro, though Johnson warned a deal was far from sure with less than three weeks until Britain leaves the single market on December 31. "I'm afraid we're still very far apart on some key things, but where there's life there's hope," he said.

Both the EU and Britain were "now said to be showing flexibility", said Axi strategist Stephen Innes.

"The view remains that Johnson will bet he can find a sufficient compromise to appease the Brexiteers rather than risk the political fallout from a no-deal exit whilst simultaneously facing the ongoing Covid crisis and likely lockdown scenarios" heading into the first quarter of 2021, Innes added.

And OANDA's Craig Erlam said: "It does seem like some progress is being made and with neither side willing to be the ones to call off the talks, a minute to midnight compromise looks likely. This is a negotiation after all and there's nothing to be gained by showing your hand at this point."

Back to the trenches

Investors are keeping tabs on Capitol Hill, where lawmakers are still battling to hammer out a fresh stimulus for the beleaguered US economy, with hope they can reach a deal before the end of the year.

However, with both sides digging their heels in, analysts said there were worries about their chances of success.

"After the early passage of a huge relief package in March, both parties have gone back into their partisan trenches, seemingly more willing to inflict pain on the economic victims of the pandemic than to cede an inch of ground," said David Kelly at JP Morgan Asset Management.

Still, the rollout of vaccines is keeping traders optimistic, even as surging infections force governments to impose strict containment measures, with Germany the latest to announce a lockdown.

US regulators gave the go-ahead for the use of the Pfizer-BioNTech jab on Friday and officials said 20 million Americans could receive by the end of the year and 100 million by March.

The vaccine "is giving markets the ability to look past the valley", Andy Kapyrin, of RegentAtlantic Capital, told Bloomberg TV.

Tokyo, Shanghai, Sydney, Mumbai, Manila, Jakarta and Singapore all enjoyed gains but Hong Kong, Seoul, Bangkok, Taipei and Wellington dipped.

London opened barely moved, while Paris and Frankfurt both rose.