Europe open: Shares crawl higher despite new UK lockdown

European shares inched higher on Tuesday as investors put aside worries over a new national lockdown in Britain to stem a surge in coronavirus cases sparked by a UK variant.

The pan-European STOXX 600 index was up 0.5%, with London's FTSE 100 0.42% higher, boosted by oil stocks such as Shell and BP. Germany's DAX rose 0.3% as that country's government also considered an extended lockdown.

US shares had been sold off overnight on worries over the rising number of Covid-19 cases and futures were slightly higher on Tuesday morning as investors eyed runoff Senate elections in the state of Georgia where a tight race will determine who gains control of the upper chamber.

UK finance minister Rishi Sunak was scheduled to outline the last business support package on Tuesday.

"Although there is a lot of noise around this lockdown in the UK, the long-term narrative remains tentatively optimistic about vaccines allowing a return to relative normality by the spring," said Markets.com analyst Neil Wilson.

"Whilst those of with children in school are disappointed that they are being asked to shoulder any of the burden, let alone see their lives upended again, the market is relatively comfortable with the fact Q1 is going to be tough."

In equity markets, shares in fashion retailer Next surged 8% after the retailer reported a smaller-than-expected drop in sales over Christmas and said online sales made up for almost all those lost in retail stores. In the nine weeks to 26 December, full price sales declined 1.1% on last year, coming in ahead of the retailer’s central guidance for an 8% drop in its October trading update.

Online sales during the period rose 38%, with UK online sales up 36%, while retail sales slumped 43%.

German chipmaker Dialog Semiconductor gained 3.8% after an upbeat fourth-quarter revenue forecast due to strong demand for 5G phones and tablets.

Supermarket chain Morrisons was also in the black after it reported a 9.3% rise in like-for-like sales over the key Christmas and New Year three-week period to January 3.

Royal Mail shares were boosted by an upgrade to ‘hold’ at Berenberg.