European stocks rebounded after a tough start to the week following their worst one-day performance since June on Monday.
Markets were relieved following an announcement that the UK will not be going into a second lockdown.
Still, UK prime minister Boris Johnson warned Britain on Tuesday that it had reached a “perilous turning point” as coronavirus cases continue to rise, as he laid out new restrictions that could last six months to curb the resurgence of COVID-19 in England.
Watch: What are the new COVID-19 measures announced by the PM?
London’s FTSE 100 (^FTSE) reversed losses in early trading, up 0.7% on Tuesday.
“A government that came under heavy criticism for not acting quickly enough during the first wave is more likely to work on worst-case scenario outcome than waiting for more evidence to fall in their lap,” said Stephen Innes, chief global market strategist at AxiCorp.
On Tuesday, attention also turns to US Federal Reserve chair Jerome Powell and Treasury secretary Steven Mnuchin who will appear before the House Financial Services Committee.
There is also concern about the US Congress remaining at a standstill over the size and scope of another COVID-19 response bill. It would be in addition to roughly $3tn (£2.31tn) already enacted into law.
Watch: What are negative interest rates?
Asian stocks saw subdued performance as the US faces potential delays in expanded stimulus and lockdown concerns continue to hit Europe, undermining positive sentiment towards global equity markets.
Japan’s Nikkei (^N225) rose 0.2%, Hong Kong’s Hang Seng (^HSI) fell 1%. It continued to be dragged down by HSBC and Standard Chartered shares after revelations were made on Monday that the banks were among the lenders who transferred $2tn in suspect funds over nearly two decades. China’s Shanghai Composite (000001.SS) slid 1.3%. The KOSPI (^KOSPI) in South Korea was also down 2.5%.