UPDATE 2-British mid-caps recover sharply as Brexit deal hopes revive

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* Job redundancies hit record high

* Chemring hits eight-year high after 2020 results

* FTSE 100 down 0.3%, FTSE 250 up 0.5% (Updates to market close)

Dec 15 (Reuters) - British mid-cap stocks gained ground on Tuesday in the final hour of trading as renewed hopes of a Brexit trade agreement overshadowed concerns over a weak labour market report and concerns over new restrictions in London.

The domestically focussed FTSE 250 index recouped early losses to end about 0.5% higher as a BBC journalist tweeted Britain and the European Union are heading towards a trade deal that will satisfy Brexit supporters.

A sharp rise in the sterling helped the blue-chip FTSE 100 index pare its losses to about 0.3% with consumer staples weighing the most.

The FTSE 100 has lost 13.6% in value so far this year, which is shaping up to be its worst since the global financial crisis in 2008-09, as pandemic-driven lockdowns battered the economy and led to mass layoffs.

“Equity prices will appreciate further from today’s levels through 2021, although not by as much as earnings advance, bringing price-to-earnings ratios down modestly,” said Frédérique Carrier, head of investment strategy at RBC Wealth Management.

The UK’s economy is most likely to regain its pre-pandemic highground only in 2022, Carrier added.

An official report on Tuesday showed Britain’s jobless rate rose again in the three months to October and redundancies reached a record high.

The job market outlook darkened further as tougher curbs were imposed in London due to increased infection rates that may be partly linked to a new variant of the coronavirus.

Among individual moves, Chemring jumped to an eight-year high after the defence contractor said its 2020 results were ahead of its expectations.

JD Sports, Britain’s biggest sportswear retailer, bought retailer Shoe Palace for $325 million in a move that would expand its footprint on the U.S. West Coast. However, its shares ended 0.9% lower after more than doubling in value this year. (Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh. V, Subhranshu Sahu and Tom Brown)