European stocks set to fall sharply at the open amid omicron variant vaccine fears

LONDON — European stocks are expected to open higher on Tuesday amid cautious optimism that the omicron Covid variant might not derail the global economic recovery, as initially feared.

The U.K.’s FTSE index is seen opening 31 points higher at 7,148, Germany’s DAX 71 points higher at 15,348, France’s CAC 40 up 23 points at 6,799 and Italy’s FTSE MIB 87 points higher at 26,108, according to data from IG.

The positive start for European markets continues positive momentum seen on Monday when European and U.S. stocks rose following last Friday’s sell-off as concerns over the newly discovered omicron Covid variant appeared to ease.

In the U.S. stocks got a big boost after President Joe Biden said economic lockdowns in response to the omicron variant are currently off the table and there will be no new travel restrictions.

Covid symptoms linked to the omicron variant have been described as “extremely mild” by the South African doctor who first spotted the new strain. Nonetheless, the World Health Organization warned Monday that the omicron variant is likely to spread further and poses a “very high” global risk.

Read more: Covid omicron variant poses ‘very high’ global risk and is likely to spread, WHO warns

U.S. stock futures climbed in overnight trading on Monday while Asia-Pacific markets were more cautious, trading mixed overnight, as investors reassessed the risks associated with the new variant.

Data released Tuesday showed Chinese factory activity unexpectedly growing in November, with China’s official manufacturing Purchasing Managers’ Index for November coming in at 50.1. That was above expectations by analysts in a Reuters poll for a reading of 49.6. PMI readings below 50 represent contraction while those above that level signify expansion.

Stateside, investors are looking ahead to key economic data set to be released this week, including the November jobs report on Friday which is expected to show solid jobs growth. Economists surveyed by Dow Jones expect 581,000 jobs to have been added in November.

Earnings come from Easyjet, Greencore, SAS and Volvo Cars on Tuesday while data releases include flash inflation data for the euro zone in November, France’s final third-quarter gross domestic product data as well as German unemployment figures for November.

— CNBC’s Eustance Huang contributed to this market report.