Business

PARIS — Nearly 30 years ago Airbus began charting a new course for air travel with a mammoth jet that would shuttle hundreds of people to far-flung cities worldwide, but harsh economic realities eventually got the better of the A380 superjumbo.

After the plane's launch just over 11 years ago, the final two A380s will be delivered in 2021, Airbus said on Thursday, marking the end of an ambitious but ultimately misguided bet.

"The A380 was a strategic feat which put Airbus on equal footing with Boeing, by dethroning the 747," said Sebastian Maire, an aviation expert at the consulting firm Kea and Partners.

But from the start the huge double-decker struggled to get off the ground, causing headaches for executives as they tried to convince airlines to take a punt on how to move millions of passengers in the future.

The idea was to prepare for a surge in traffic as middle classes emerged in Asia and other developing regions, eager to join the growing ranks of business and leisure travellers as globalisation rippled across the globe.

With the A380 airlines would cut fuel costs and pollution by moving more passengers via fewer planes between major airports, where smaller aircraft would then bring them to their final destinations.

But this "hub and spoke" model would require huge investments by both airlines and airports, which had to lengthen and widen runways and hangers to accomodate the huge wingspans.

And in the end industry dynamics proved the opposite: airlines instead opted for more direct flights between more cities, using midsize planes like Boeing's hugely popular 787 Dreamliner.

"In 2000, when we took the decision to launch the A380, we didn't know what the market would look like 20 years later," Airbus's outgoing CEO Tom Enders told French daily Le Figaro in an interview on Thursday.

"It was a risky decision."

Hopes and headaches 

Few would have imagined how it would all end when heads of state and industry executives gathered in January 2005 at the Airbus headquarters in Toulouse, southwest France, to celebrate the plane's first factory rollout.

The project dovetailed perfectly with the desire of European nations to build up their aerospace groups into a continental powerhouse, capable of taking on Boeing and other US rivals.

Ex-president Jacques Chirac treated the leaders of Britain, Germany and Spain to lunch after the glitzy unveiling, lauded as proof of Airbus's success.

Huge sections of the A380 would be built at Airbus factories spread across Europe before being transported to Toulouse for final assembly.

But the launch enthusiasm quickly faded as production snafus and missteps emerged, in part reflecting the difficulty in integrating national teams with different corporate cultures.

Electrical wiring proved especially vexing, leading to problems that would cost billions of euros to fix and a series of delivery delays.

Inaugural client Singapore Airlines had to wait an extra 18 months before finally launching the first commercial flight in October 2007.

While passengers raved about the quiet and spacious cabins, production delays continued, heightening concerns that the plane would turn out to be a white elephant.

'Our customers love it' 

Despite an initial burst of orders mainly from Middle East and Asian clients, most airlines balked at the A380, which could be profitable only if every seat was sold on every flight.

The global financial crisis of 2007-08 put paid to that strategy, and made other airlines wary of committing to the costly plane, which currently has a list price of 446 million euros a piece.

Airbus managed to chalk up just over 320 orders for the A380, and had already slowed production in recent years before pulling the plug on Thursday.

"Our customers love the aircraft. It's very efficient in the way we operate and we are pleased with it," Willie Walsh, head of British Airways and Iberia parent IAG, said earlier this month.

But Walsh said the price tag was keeping him from adding to BA's fleet of 12 superjumbos.

"We have made it clear to Airbus that we might consider some additional aircraft, but it would only be at a price that we would find attractive," he said.

Boeing, by contrast, has seen its bet on the smaller but more fuel efficient Dreamliner, garnering more than 1,100 orders since it entered service in 2011.

At a conference call with Airbus management Thursday, few analysts dwelled on the A380's failure, instead congratulating the company on the robust 29 per cent jump in 2018 profits.

"We often praise the ability of new-economy companies, especially American ones, to quickly take decisions and experiment with new ideas," said Philippe Plouvier, an associate at the Boston Consulting Group.

"It would be a mistake to criticise Airbus for exploring a new frontier in aerospace, and then decide to move on to something else," he added.

LONDON — Investors hungry for progress on resolving a US-China trade war seized on US President Donald Trump's comment that he could let a March 1 deadline for a deal with China "slide", taking this as a cue to buy stocks and sell bonds on Wednesday. 

As US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer prepared for talks in Beijing to hammer out a trade deal, markets cheered the signal that there could be an extension to a tariff truce.

European shares followed Asia's lead with the pan-European STOXX 600 up 0.4 per cent, slightly weakening by midday, while US futures climbed 0.2 per cent.

Chemicals, carmakers and luxury goods saw the biggest gains as investors snatched stocks whose valuations have been hit by trade tariffs and a slowdown in China.

China's blue-chip CSI 300 rose around 2 per cent to a four-month high overnight, with IT shares leading gains.

Trump said on Tuesday that he could see letting the March 1 deadline for reaching a trade agreement with China "slide for a little while" if the two sides were close to a complete deal.

He added he is "not inclined" to delay raising tariffs.

"There's still a level of uncertainty there but at least the rhetoric does not show he is digging his heels in, so the market has quite rightly taken it as a positive," said Justin Onuekwusi, fund manager at Legal & General Investment Management. 

"But of course the key thing is he can change his mind."

Investors remained concerned about underlying trends of slowing economic growth and weaker earnings. Analysts have slashed their 2019 earnings growth estimates for developed stocks from around 10 per cent to 5 per cent. 

As investors went back into risky assets they sold safe-haven government bonds, driving yields up. The 10-year US Treasury yield hit a one-week high at 2.7 per cent.

In Europe, political uncertainty in Spain bubbled up.

Spain's IBEX fell into the red, down 0.2 per cent, and Spanish bond yields rose after parliament rejected the Socialist government's 2019 budget proposal, raising the chances of a snap general election.

"If they do call elections we may see a bit of noise in the near term, but for us that would be one to fade because the tail risks are pretty low in terms of getting a party that's negative for markets," said Mohammed Kazmi, portfolio manager at UBP in Geneva.

Central bank support 

Risk assets have also been helped up by central banks' dovish shift.

The Federal Reserve (Fed) will chart plans to stop letting its bond holdings roll off "at coming meetings", Cleveland Fed President Loretta Mester said on Tuesday, signalling another major policy shift for the Fed after pausing interest rate hikes.

"Mester's comments follow on quite clearly from what Powell said at the recent press conference, which was already quite a dovish shift which the market wasn't expecting," said UBP's Kazmi.

"Everyone wants to catch this rally because they know at some point it will fade, there will have to be some sort of adjustment later this year because this is pretty much as dovish as [the Fed] can get without moving to a rate cut."

Progress on another issue unnerving markets — the US government shutdown — also provided a boost to risk appetite.

The Cboe Volatility Index, Wall Street's so-called "fear gauge", dropped overnight to 14.95, its lowest level since October.

The US dollar was on the defensive: its index against six major currencies barely managed a 0.1 per cent rise to 96.793.

Slipping deadlines were front and centre not only on the trade war front but also in Brexit.

Sterling held flat against the dollar as investors awaited a Brexit debate in parliament later in the day, during which proposals on Brexit extension would be discussed once again.

Emerging market stocks faltered, trading flat on the day. BAML on Tuesday said investors saw emerging markets as the "most crowded" trade, for the first time ever.

In commodities, oil prices surged after OPEC said it cut production sharply in January, and as US sanctions hit Venezuela's oil exports.

US WTI crude oil futures were up 1.1 per cent at $53.71 per barrel, while Brent crude futures rose 1.3 per cent to $63.23.

London copper prices eyed their first session of gains in five as hopes of a trade deal soothed concerns over the economy in China, the world's biggest metals consumer.

AMSTERDAM — Deutsche Post DHL has hired hundreds of workers to deal with new customs procedures expected to be imposed after March 29, when Britain is due to leave the European Union, an executive said on Tuesday.

Europe is Britain's largest trading partner. New tariffs and goods clearance procedures could be introduced unless Britain secures a deal on future relations with the 28-member bloc before it leaves.

John Pearson, chief executive of the DHL Express subsidiary, told Reuters his company "began hiring in earnest about three months ago" and had been recruiting about 50 new workers a week.

"These are people on the ground in the hubs. They are coming onto our payroll sitting in a hub facility probably processing customs paperwork to make sure that the goods are cleared quickly," he said in an interview.

"We are recognising that if, in a no-deal scenario customs will be the be all and end all, then we don't want to be caught short," he said.

Pearson, who took up the job in January, did not specify how Brexit would directly impact the company's business, but said "if there was a no deal suddenly announced on March 29 we would be more ready than anyone else."

DHL, one of Europe's largest parcel deliverers with major operations across the EU and Britain, transports goods by air and road between the two trading regions.

BERN, Switzerland — Britain and Switzerland signed a deal on Monday to preserve trade relations between the two countries even if London opts to leave the European Union without a deal with Brussels. 

British International Trade Secretary Liam Fox and Swiss Economy Minister Guy Parmelin signed the bilateral trade agreement in Bern on Monday.

"This new agreement lays the foundations for the two parties to continue their sound economic and trade relations once the United Kingdom has left the EU," the Swiss government said in a statement.

Switzerland is not a member of the EU, but its relations with Britain are based on a long line of bilateral agreements between Bern and the bloc.

If London and Brussels manage to reach a deal for an orderly Brexit, the bilateral agreements between Switzerland and the EU will continue to apply to Britain until the end of the transition period, the statement said.

But in the case of a "no-deal" Brexit, those agreements will no longer apply to Swiss-British relations and the new bilateral trade agreement between the two countries will kick in.

"Should the United Kingdom leave the EU on 29 March without a deal, the agreement will come into effect on a provisional basis from 30 March 2019," the government statement said.

Britain is currently one of Switzerland's biggest trading partners.

In 2017, Switzerland registered 11.4 billion Swiss francs ($11.4 billion, 10.1 billion euros) in exports to Britain, making it the wealthy Alpine nation's sixth largest export market. 

Switzerland, meanwhile, is Britain's fifth biggest export partner outside the EU.

The Swiss government is pursuing a strategy dubbed "Mind the Gap", which is intended to stabilise British ties after Brexit.

It said it had reached a range of agreements with London aimed at ensuring "that the existing mutual rights and obligations in its relationship with the UK will continue to apply as far as possible after the UK leaves the EU, and to expand them in certain areas”.

Switzerland and Britain have already signed agreements shoring up their cooperation in the areas of road transport, air transport and insurance.

They have also signed a deal to preserve the rights of some 43,000 British nationals living in Switzerland and the 35,000 Swiss residing in Britain after Brexit.

BEIJING — US negotiators met with their Chinese counterparts in Beijing on Monday for a new round of high-stakes trade talks, hoping to reach a deal before the March 1 deadline set by US President Donald Trump. 

The meeting comes as the International Monetary Fund (IMF) has warned of a possible global economic "storm".

Preliminary discussions had been expected to start on Monday, according to the White House, before US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin step in for the main event on Thursday and Friday. 

In December, Washington suspended for three months its plan to increase tariffs on $200 billion worth of Chinese imports — to 25 per cent from the current 10 per cent — to allow time for negotiators to work out a trade spat that has triggered fears of a global economic slowdown.

Deputy trade representative Jeffrey Gerrish was due to lead the US delegation in preparatory meetings to begin on Monday, the White House had said.

The talks will include officials from the agriculture, energy and commerce departments.

Gerrish left his hotel in central Beijing on Monday morning without talking to the media.

Mnuchin and Lighthizer will be joined by David Malpass, Trump's nominee for president of the World Bank who has worked to limit the bank's assistance to Beijing. 

The Chinese delegation will be led by Vice Premier Liu He, who will be joined by central bank governor Yi Gang.

Liu, China's chief trade negotiator, met last month with Trump, who announced that a final resolution of the trade dispute would depend on a meeting with Chinese President Xi Jinping "in the near future" to iron out the "more difficult points" fuelling the spat. 

While the two sides said major progress was made after talks last month in Washington, more recent comments have jarred financial markets, amplifying concerns about how the dispute will affect global growth.

Trump said last week that he did not expect to meet his Chinese counterpart before the trade truce expires on March 1, and top White House economic adviser Larry Kudlow said that while Trump was "optimistic" about a deal, a "sizable distance" still separated the two sides.

Washington is demanding far-reaching changes from China to address commercial practices that it says are deeply unfair, including theft of American intellectual property and myriad of barriers that US and other foreign companies face in the Chinese domestic market.

China has offered to boost its purchases of US goods during the truce, but is likely to resist calls for structural changes to its industrial policy including slashing government subsidies, said Louis Kuijs of Oxford Economics.

"The US side will not fully remove the spectre of tariff hikes any time soon," Kuijs said, given that there is "broad support in the US for a hard stance on China".

The two sides have already slapped tariffs on more than $360 billion in two-way trade, which has weighed on the two countries' manufacturing sectors and sent jitters through global markets.

 Economic storm 

The International Monetary Fund warned on Sunday of a possible economic "storm" as growth forecasts dip.

It cited the trade row as one of four "clouds" over the global economy, along with financial tightening, Brexit uncertainty, and China's slowdown.

"We have no idea how it [the trade dispute] is going to pan out and what we know is that it is already beginning to have an effect on trade, on confidence and on markets," IMF managing director Christine Lagarde told the World Government Summit in Dubai.

Last month, the IMF lowered its global economic growth forecast for this year from 3.7 per cent to 3.5 per cent.

WASHINGTON — With a March 1 deadline fast approaching, US and Chinese officials resume negotiations next week to prevent escalation of a trade dispute that has major implications for the global economy.

China’s economy already has shown signs of slowing, while the trade war has shaken the confidence of US businesses, as retaliatory tariffs have raised prices and helped choke off a key export market.

President Donald Trump’s strategy has failed to produce a reduction in the US trade deficit with China, which he set as a primary goal.

Under the looming threat of a surge in tariffs once the 90-day truce expires, financial markets worldwide have lost ground in recent days as comments about the status of the talks turned more cautious.

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will lead the US delegation for the third round of talks on Thursday and Friday in Beijing.

While officials seemed optimistic after talks last week in Washington, more recent comments have jarred financial markets, amplifying concerns about how the dispute will affect global growth.

US President Donald Trump said on Thursday he did not expect to meet his Chinese counterpart Xi Jinping before a March 1 deadline for the two economic superpowers to reach a deal.

Trump had said final resolution of the trade dispute would depend on the meeting with Xi “in the near future” but told reporters it had not yet been arranged.

Also, top White House economist Larry Kudlow said that while Trump was “optimistic” about prospects for a deal, there remained a “sizable distance” separating the two sides.

Deadline extension? 

While China has offered to buy more US soybeans and beef, officials have yet even to agree on a draft of a deal that would address key US concerns, according to media reports.

Washington is demanding far-reaching changes from China to address unfair practices it says are deeply unfair, including theft of American intellectual property and the massive Chinese trade surplus.

The dispute has escalated to encompass $360 billion in trade between the two economic superpowers, and without an agreement by the start of March, the Trump administration is poised to more than double the punitive duties on $200 billion in Chinese goods.

However, amid pressure from the business community for the two sides to resolve the dispute, CNBC cited a senior administration official saying the March 1 deadline could be pushed back.

“Right now it is in place but that is right now,” the official told CNBC. “It could change via telephone.”

The White House said there would be a preparatory meeting of senior officials beginning February 11 and the talks would include officials from the agriculture, energy and commerce departments.

The main delegation also includes David Malpass, whom President Donald Trump has nominated to be president of the World Bank and who has worked to limit the bank’s assistance to Beijing.

However, strident White House China critic Peter Navarro was not listed as part of the US team.

By Lewis Krauskopf

NEW YORK — World stocks fell for a third straight day on Friday on pessimism about global economic growth and trade tensions, putting them on track for their first weekly drop this year, while the US dollar was on track for its biggest weekly gain since August.

MSCI's gauge of stocks across the globe shed 0.60 per cent on the day, and was set to fall for the week following six consecutive weekly increases.

Investors were digesting economic and trade developments from Thursday, when the European Commission sharply cut its forecast for eurozone growth this year and next and President Donald Trump said he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline to achieve a trade deal. 

Thursday's trade developments "took off the table what the market was probably starting to price in, which was a resolution by March 1", said Anthony Saglimbene, global market strategist at Ameriprise Financial in Troy, Michigan. "It just adds to the fact that investors want some of these trade tensions off the front pages, and it doesn't look like we are going to get that."

Stocks pared some losses after a White House spokeswoman said US-China trade talks would resume next week in Beijing.

On Wall Street, the Dow Jones Industrial Average fell 155.79 points, or 0.62 per cent, to 25,013.74, the S&P 500 lost 9.31 points, or 0.34 per cent, to 2,696.74, and the Nasdaq Composite dropped 14.80 points, or 0.2 per cent, to 7,273.55.

Adding to the dour mood, analysts now expect first-quarter earnings for S&P 500 companies to decline 0.1 per cent from a year earlier, which would be the first such quarterly profit decline since 2016, according to IBES data from Refinitiv.

"The sentiment continues to be investor anxiety about US -China trade relations, the slowing global growth, and I think this week what is starting to really creep into investors' anxiety is around corporate earnings," said Michael Arone, chief investment strategist at State Street Global Advisers in Boston.

The pan-European STOXX 600 index lost 0.56 per cent.

The dollar edged higher against a basket of currencies, keeping it on track for its strongest weekly gain in six months, as traders piled into the greenback in a safe-haven move on worries about a weakening global economy.

The dollar index rose 0.14 per cent, with the euro down 0.16 per cent to $1.1322.

"The rally that propelled the dollar broadly higher last year has enjoyed renewed life with US growth remaining solid while peers abroad lose momentum," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

US Treasury yields fell for a fourth straight session.

Benchmark US 10-year notes last rose 6/32 in price to yield 2.6339 per cent, from 2.654 per cent late on Thursday.

Oil prices were little changed on the day, but were heading for a weekly loss on renewed concerns about slowing global demand.

US crude rose 0.15 per cent to $52.72 per barrel and Brent was last at $62.07, up 0.71 per cent on the day.

LONDON — Mounting global growth worries thrust share markets into reverse on Thursday, while the dollar scored its longest winning run since a hot streak in early October that helped trigger a wave of worldwide “bear” markets.

Wall Street looked set to suffer back-to-back losses later after Europe had set the tone. 

Some poor earnings and weak data out of Germany ensured most of the main bourses were lower and kept MSCI's main index of world stocks in the red for a second day, too.

The extent of the current slowdown in the global economy was highlighted, as India unexpectedly cut its interest rates and the euro got hit to $1.1346 by Germany's fourth consecutive drop in industrial output.

That only compounded the 1.3 per cent the euro has lost over the last week and the tailwind behind the dollar, which has risen every day since Friday's strong US jobs data. It has also recovered almost all the losses suffered after the Federal Reserve all but abandoned plans for more rate hikes last month.

"Another day, another piece of terrible German data. EUR/USD risks a move to $1.1300," said ING's chief EMEA FX and interest rate strategist, Petr Krpata.

Elsewhere the pound was struggling near $1.29 again after the Bank of England kept rates on hold, while gloomy jobs data saw New Zealand's dollar suffer a similar flop as its Australian counterpart had seen the previous day. 

The kiwi slid to $0.6744, losing nearly 2 per cent in the past 24 hours, as investors wagered on the risk of a cut in interest rates there. New Zealand's central bank holds its first meeting of the year next week. 

Asian trading was still light overall though with China on holiday and no major economic data on the diary.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.1 per cent as it rose to its highest since early October. 

The index has risen steadily since early January as the US Federal Reserve changed its tune and emerging markets have surged more broadly after a torrid 2018.

Australia's benchmark stock index jumped 1.2 per cent amid expectations of easy monetary policy after the central bank chief shifted away from his previous tightening bias.

Japan's Nikkei slipped 0.6 per cent though and the caution quickly spread to Europe. 

London's FTSE was the only major bourse clinging to positive territory, helped by a weak pound, whereas the rest were down at least 0.6 per cent as were E-Mini futures for the S&P 500 and Dow. 

We are all doves now 

One of the day's big surprises came from India where its central bank unexpectedly lowered interest rates to 6.25 per cent to boost a slowing economy after a sharp slide in the inflation rate.

Italian bonds were back under pressure with the European Commission slashing its 2019 growth forecast.

Italy agreed a deficit target of 2.04 per cent in December, averting a major fall-out with the EU, though this was based on a growth assumption of 1 per cent. Slowing growth in Italy could make it harder for the country to remain within EU rules.

However, Benjamin Schroeder, rates strategist at ING, said he did not expect the EU to demand more fiscal tightening from Italy, should its forecasts be reduced.

"The EU has another thing to deal with — Brexit — and the other thing is do you want to infuse the campaign ahead of the parliamentary elections with this topic." 

The next major trigger for markets will more likely be any breakthrough in the US-Sino tariff talks when the two sides meet in Beijing next week.

US President Donald Trump offered little new to chew on in his State of the Union speech but Treasury Secretary Steven Mnuchin said on Wednesday he and other US officials will aim to clinch a deal next week to avert a March 2 increase in US tariffs on Chinese goods.

Probably more pressing though for the US markets is the threat of another government shutdown, Nick Twidale, an analyst at Rakuten Securities Australia said.

"With both sides of the house standing firm on the contentious border wall issue at present, and the deadline approaching swiftly on February 15, we could be back where we were just a few weeks ago." 

The broad dollar gains put pressure on gold, which eased to $1,303.96 per ounce, slipping further from last week's top of $1,326.30.

Oil prices eased too after US crude inventories rose and as production levels in the country held at record levels.

Brent crude futures slipped 23 cents to $62.46. U.S. crude eased 19 cents to $53.82 a barrel.

LONDON — The Australian dollar nosedived on Wednesday after its central bank opened the door to a possible rate cut, in yet another indication the global economic slowdown is persuading policymakers to go easy on rate hikes. 

World stocks too stalled just off two-month highs , undermined by the growth worries as well as US President Donald Trump's combative State of the Union address in which he unveiled no new policy initiatives. European shares traded marginally in the black and equity futures signalled a flat to weaker open on Wall Street.

Australia's central bank is only the latest to signal policy easing in the face of economic headwinds — the US Federal Reserve has all but abandoned plans for further rate hikes, while the European Central Bank also sounded less certain that it will start tightening policy later this year.

The U-turn pushed the Australian dollar 1.5 per cent lower, putting it on track for its biggest daily drop in a year. Australian short-dated bond yields were set for their biggest one-day drop in more than two years, down 10 basis points on the day.

"When I look at the global economy, Germany on is on the cusp of recession, Italy is in recession, Japan in on the cusp, the Chinese economy is seeing the lowest growth in three decades. The Fed had a look at the picture and said the world is slowing, it is maybe appropriate to pause," said Rhys Petheram, a fund manager in the multi-asset team at Jupiter Asset Management.

"I want to be more defensive in my allocation to risk," he added.

Wall Street finished strong on Tuesday and is now some 16 per cent off December lows but sentiment was knocked by the US president's failure in his annual speech to unveil new infrastructure plans. 

He also raised the possibility of another government shutdown should financing not be forthcoming for a US-Mexico border wall.

Futures indicated a weaker open on US stocks with the S&P and Nasdaq both down 0.1 per cent. 

European stocks, meanwhile, were undermined by the latest batch of earnings, which further underscored the weak local economy and the drag on companies from slower global trade.

Shares in BNP Paribas and carmaker Daimler slumped 1 per cent and 3 per cent respectively, ending the market's six-day rally. French-listed BNP Paribas lowered its profit and revenue growth targets for 2020 while Daimler's profits were hit by trade war and ballooning costs for developing electric and self-driving cars

Germany's DAX index lost 0.5 per cent.

Europe drags 

Europe's economic weakness prompted demand for bonds, with German 10-year government bond yields trading around 0.17 per cent, well off the 0.21 per cent highs hit on Tuesday. 

Investors have pushed back expectations that the European Central Bank will hike rates this year, a view reinforced after data showed German industrial orders fell on weak foreign demand in December.

Investors will also be looking to the European Commission's winter macroeconomic forecasts, due to be published on Wednesday or Thursday. Large downward revisions to growth and inflation are likely, many analysts predict. 

"The moderation of growth is so widespread it makes the ECB's job easier, as it was more difficult for them to justify their stance when Germany was leading the economic cycle while other countries were lagging growth," said Monica Defend, chief strategist and deputy head of research at Amundi.

The appetite for bonds also was evident in the 33 billion euros worth of orders investors had placed for Italy's new 30-year bond by 11:15 GMT.

Concerns for world growth fanned fears for global energy demand, hitting crude prices. Brent futures were trading around $61.59 a barrel.

On the Brexit front, sterling looked fragile at around $1.2951 after losing nearly 0.7 per cent on Tuesday when weak service sector data underscored damage to the economy from Brexit uncertainty.

Prime Minister Theresa May will travel to Brussels on Thursday to tell EU leaders they must accept legally binding changes to the Irish border arrangements of Britain's divorce deal or face a disorderly no-deal Brexit.

British blue chip shares hit their highest in more than two months on Tuesday after heavyweight BP doubled its annual profit and miners rallied on higher iron ore prices, feeding into an upbeat mood on global markets.

London's main index rose 1.1 per cent by 09:43 GMT, hitting levels not seen since December 3 and extending gains as sterling weakened.

The index of midcaps was more subdued, up just 0.1 per cent.

A dip in the pound generally boosts the main index, which earns a lion's share of its earnings abroad. All sectors on the FTSE 100 were in the black by 09:48 GMT.

Sterling's weakening, to near two-week lows, was not good news for domestically oriented companies, however, as it came in reaction to a survey showing dominant services sector firms reported job cuts for the first time in six years.

That signalled further risks to Britain's economy although retailers were lifted by data showing a pickup in consumer spending last month.

Asian markets extended gains on Tuesday as overnight strength on Wall Street and the US Federal Reserve's cautious turn supported appetite for riskier assets.

On Britain's main index, oil major BP gained 4.2 per cent — on course for its best day since September 2016 — after full-year numbers topped expectations.

Mining stocks hit their highest since late June last year after Brazil ordered top producer Vale to shut its tailings dams following the deadly incident last week, raising concerns about falling output. Singapore iron ore futures were up 3.4 per cent overnight.

Online retailer Ocado, among last year's best performing stocks, shed early losses to rise 1 per cent despite results showing investment hit earnings.

Drugmaker Indivior, however, sank as much as 25 per cent on news of a loss in its fight against generic competitors in a US court. 

Retail stocks were in favour as a survey showing British consumers picked up the pace of their shopping in January offered some respite to a sector that suffered its worst Christmas in a decade. Marks & Spencer was 1.2 per cent higher. 

Prime Minister Theresa May headed to Northern Ireland on Tuesday, promising to find a solution to the border issue at the centre of her Brexit headaches.

German Chancellor Angela Merkel on Monday called for a "creative" compromise to future Irish border arrangements on Monday and she said in Tokyo that there was "still time" for a solution.

Chief EU Negotiator Michel Barnier said the EU would not reopen its Brexit Withdrawal Agreement, but that alternatives to the controversial Irish backstop could be worked on after Britain leaves the bloc.

"We have been mercifully free of any Brexit discussion so far but the clock is ticking on that... I am not sure they see either side giving way which would make life a lot more difficult in the near term," said Chris Beauchamp, analyst at IG.

"I think we are having a calm before the storm which could easily start from next week."

If May fails to get parliament's approval for a revised deal on February 13, lawmakers will vote on next steps on February 14.