LONDON – European stocks were higher Tuesday morning, trying to bounce back from a brutal sell-off in the previous session as investor sentiment was shaken by a new strain of coronavirus in the UK
The pan-European Stoxx 600 rose 1.1%, with the German DAX and French CAC index rising 1.3% each. The UK’s FTSE 100 bucked the trend, falling 0.2%. Bank stocks were the top winners, up 2.2%, with Lloyds gaining over 4% to lead the sector.
European markets came under heavy selling pressure on Monday as they had concerns about a rapidly spreading Covid mutation, first identified in the UK. The new variant forced the British government to shut down London and other parts of south-east England and to trace the confusion of households over the Christmas break.
The variant, which scientists say is up to 70% more transmissible than previous strains in the UK, has also been identified in Italy, the Netherlands, Belgium, Denmark and Australia. It has resulted in several countries around the world closing their borders with the UK, disrupting travel and raising concerns about possible food shortages as the deadline for the Brexit transition approaches.
Meanwhile, the UK and EU remain bogged down on post-Brexit trade relations as the December 31 deadline draws nearer and disputes over issues such as fisheries plague talks. British Prime Minister Boris Johnson said Monday the country could still collapse without a deal.
“The position is unchanged, there are problems,” British Prime Minister Boris Johnson told reporters on Monday. “It is important for everyone to understand that Britain needs to be able to fully control its own laws and that we need to be able to control our own fisheries.”
“The case remains that the WTO terms are more than satisfactory for the UK and we can certainly face any difficulties that come our way.”
Sterling extended Monday’s losses on Tuesday and fell another 0.5% to around $ 1.34.
Official data showed that UK GDP grew a record 16% in the third quarter, but still didn’t make up for an 18.8% decline in the previous quarter when much of the economy closed.
In Asia, stocks fell on jitter over the new strain of coronavirus. The broadest MSCI index for stocks in Asia Pacific outside Japan fell 0.43%.
On Wall Street, stock futures were mixed after a volatile session in which the Dow Jones Industrial Average cut a 400-point deficit.
The muted move came when Congress passed a coronavirus aid and government spending package on Monday evening. The bill now goes to President Donald Trump’s desk.
In terms of individual stocks, UK supermarket stocks were under pressure on Tuesday after the interruption caused by international travel bans led to gaps on shelves. Sainsbury was down nearly 0.5% while B&M European was down 0.2%.