LONDON – European stocks will open slightly higher on Tuesday, trying to recover from a brutal sell-off in the previous session as investor sentiment was shaken by a new strain of coronavirus in the UK
The UK’s FTSE 100 is expected to barely open above the flatline at 6,420, the German DAX is expected to rise 70 points to 13,320 and the French CAC is expected to rise 30 points to 5,422, according to IG index data.
The gains are likely limited by ongoing concerns about a rapidly spreading Covid mutation first identified in Britain. The new variant forced the UK government to close London and other parts of South East England and return to mixing households over the Christmas holidays.
The variant, which scientists say is up to 70% more transmissible than previous species in the UK, has also been identified in Italy, the Netherlands, Belgium, Denmark and Australia. It has resulted in multiple countries around the world closing their borders to Britain, disrupting travel and raising concerns about potential food shortages as the Brexit transition deadline approaches.
Meanwhile, the UK and EU remain stuck in post-Brexit trade relations as the December 31 deadline approaches, with disputes over issues such as fisheries plaguing the talks. British Prime Minister Boris Johnson said on Monday the country could still crash without a deal.
“The position is unchanged, there are problems,” British Prime Minister Boris Johnson told reporters on Monday. “It is vital that everyone understands that the UK must be able to fully control its own laws and also that we must be able to control our own fisheries.”
“It remains the case that WTO terms would be more than satisfactory for the UK and we can certainly face any difficulties thrown our way.”
Sterling extended its losses from Monday to Tuesday and fell an additional 0.5% to around $ 1.34.
In Asia, stocks fell due to nervousness about the new coronavirus strain. MSCI’s widest index of Asia-Pacific stocks outside Japan fell 0.43%.
Stock futures were mixed on Wall Street after a volatile session in which the Dow Jones Industrial Average cleared a 400-point deficit.
The muted move came when Congress approved a coronavirus relief and government spending package Monday night. The bill now goes to President Donald Trump’s desk.
In terms of data, UK third quarter GDP and German consumer sentiment data are expected at 7am in London.