* Euro STOXX 600 up 0.8%
* New COVID-19 strain a "bump in the road"
* Congress approved $892 billion stimulus
* Sterling falls 0.5% as new COVID-19 strain hits Britain
* Dollar index gains 0.1%, faces 3rd straight quarterly loss
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Tom Wilson
LONDON, Dec 22 (Reuters) - Stocks rebounded on Tuesday, with
Washington's approval of an $892 billion pandemic relief package
helping them recover some of the losses caused by fears over a
highly infectious new strain of COVID-19.
The Euro STOXX 600 .STOXX added 0.8%, its biggest one-day
jump in over five weeks in sight. German GDAXI. and French
.FCHI indexes added 1% and 0.8% respectively.
London's blue chips .FTSE turned positive, too, recovering
early losses even as Britain adjusts to strict lockdowns imposed
to curb the spread of the new strain of coronavirus. Wall Street
futures ESc1 also edged into the black.
Fuelling the optimism, in part, was the U.S. Congress's
approval on Monday of a coronavirus aid package after months of
inaction. The first such aid since April came as the pandemic
accelerated in the United States, infecting more than 214,000
people every day and slowing the economic recovery.
The bill includes $600 payments to most Americans and
additional payments to millions of people thrown out of work
during the pandemic.
Market players also took stock of the damage from a new
COVID-19 variant, with investors betting that vaccines would
still be effective against the new strain.
On Monday, countries across the world shut their borders to
Britain because of fears over the new strain, snarling one of
Europe's most important trade routes just days before Britain is
set to leave the European Union.
The discovery, just months before vaccines are expected to
be widely available, brought back fears over the economic impact
of new lockdowns to counter the virus, which has killed about
1.7 million people worldwide. European shares had slumped 2.3%, their biggest one-day loss
in nearly two months, in response.
The new strain "is a bump in the road, but that road is
still leading to a much stronger recovery in the second half of
next year," said Hugh Gimber, global market strategist at J.P.
Morgan Asset Management.
"Markets are a lot calmer today because of confidence that
there is a big build up of pent-up demand and a return to much
stronger levels of activity in the second half of next year."
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 49 countries, was flat. Earlier, MSCI's gauge of
Asia-Pacific stocks outside Japan .MIAPJ0000PUS had sunk 0.8%.
THE POUND'S PROSPECTS
The stimulus news helped prop up the dollar index, which was
still on course for a third consecutive quarterly loss after
dropping some 12.5% from a March peak.
The index =USD , which measures the dollar against a basket
of six major currencies, was last up 0.1% at 90.232, still below
its Monday top of 90.978.
ING analysts said the U.S. relief package "won't be able to
fully offset the effects of people staying at home as many
businesses face tighter restrictions or are even forced to
close."
In Britain, sterling GBP=D3 slipped 0.5% after tumbling as
much as 2.5% versus the dollar on Monday to a 10-day low amid
the twin fears over COVID and Brexit.
European Commission President Ursula von der Leyen and
British Prime Minister Boris Johnson spoke on disagreements over
fisheries that are barring a new trade deal, sources
said. Analysts remained pessimistic on the pound's prospects, even
after reports of progress in Brexit trade talks. MUFG said in a note to clients it expected London and
Brussels would strike a last-minute deal, but added: "Even if a
trade deal is reached, upside potential for the pound will now
be dampened by recent negative COVID developments in the UK."