By Peter Nurse

Investing.com - European stock markets traded higher Tuesday, continuing the positive start to the new year with strong German retail sales boosting hopes of a steady economic recovery despite a surge in Covid-19 cases.

At 3:45 AM ET (0845 GMT), the DAX in Germany traded 0.2% higher, the CAC 40 in France rose 0.7% to an all-time high, while the U.K.’s FTSE 100 gained 1.3%. The pan-European STOXX 600 also climbed to a record, up 0.9%.

German retail sales rose unexpectedly in November, climbing 0.6% on the month, lifting annual retail sales to a record high despite renewed Covid-19 restrictions which held back a consumer-led recovery in Europe's largest economy.

French inflation also stabilized in December, with the 3.4% year-on-year increase in the Eurozone’s second largest economy slightly less than the 3.5% expected. The European Central Bank has argued that price pressures may be near their peak in the Eurozone, and the French figures support that view.

French Finance Minister Bruno Le Maire said on Tuesday that the country's growth would be significantly higher this year than the government's current forecast of 6.25%.

This optimism, which added to data earlier showing an improvement in China’s factory activity in December, exists despite the continued uncertainty around the Covid-19 pandemic, with many European countries, as well as the U.S., reporting record numbers of daily cases, prompting the reimposition of restrictions to stop the spread of the highly contagious Omicron variant.

European indices posted strong gains on Monday, the first trading day of the new year, with the STOXX 600 index ending at a record close. Wall Street followed suit, with the S&P 500 and the Dow Jones Industrial Average also closing at record levels, while Asia was largely on the front foot Tuesday.

In corporate news, Novartis (SIX:NOVN) stock rose 0.4% after a U.S. court of appeals upheld the validity of a patent for the Swiss drugmaker’s multiple sclerosis treatment Gilenya.

Elsewhere, the tech sector received a boost from Apple's (NASDAQ:AAPL) market value rising above $3 trillion for the first time on Monday and Tesla (NASDAQ:TSLA) publishing a strong fourth quarter in terms of vehicles delivered.

Oil prices edged higher ahead of a meeting of top producers to discuss future output levels amid rising Omicron cases but only limited restrictive measures in the biggest fuel-consuming countries.

The Organization of the Petroleum Exporting Countries and allies, a grouping called OPEC+, will meet virtually later in the day, with the cartel expected to stick to its plan to increase output by 400,000 barrels per day in February. The group has fallen short of its quota allowances repeatedly in recent months, despite its official policy numbers.