UK stock markets have jumped in their first trading session after the Christmas break.

It was investors' first chance to react to the Brexit trade deal with the EU, since markets closed early on Christmas Eve, hours before the outcome emerged.

The FTSE 100 and 250 indexes were both up more than 2.1% by lunchtime.

But banking shares tumbled across Europe as worries persisted about the impact of the coronavirus pandemic on the global economy.

Banks accounted for four of the five biggest fallers on the FTSE 100, with worst-hit Lloyds suffering a near-4% drop.

One analyst, Shanti Keleman from Brown Shipley, put the falling UK bank shares down to "no agreement on financial services equivalency in the Brexit deal".

However, Simon French of Panmure Gordon pointed out that trading was thin even by the usual standards of this time of year. "The usual market narratives are even shakier than normal," he added.

Vaccine boost
Among the biggest risers in London was drug firm AstraZeneca, which gained 3.9% on reports that the government is poised to approve its Covid-19 vaccine, paving the way for UK citizens to receive it as early as next week.

Travel shares also benefited from market optimism, led by Intercontinental Hotels Group, which climbed 4.3%.

London's rise on Tuesday followed gains on Monday for the main markets in Frankfurt and Paris, as well as on Wall Street.

Frankfurt's Dax index and the Paris Cac-40 both continued their rally on Tuesday, adding 0.3% and 0.4% respectively.

Earlier, shares in Asia surged in Tuesday trading, with Japan's Nikkei closing more than 2.6% higher.

Investor sentiment has also been buoyed by US President Donald Trump agreeing to release hundreds of billions of dollars in pandemic spending support. He had previously refused to sign off on the deal.

The pound started strongly but then slipped back, trading 0.1% lower against the euro at €1.10. It was 0.2% up against the dollar at $1.3493.