LONDON: European stock markets rallied in opening deals on Monday, rebounding from a pre-weekend slump that was sparked by fears over a new variant of Covid-19.

London, Frankfurt and Paris gained more than one percent in value, having tumbled by around four percent on Friday.

"Markets were oversold on Friday and traders panicked," said AvaTrade analyst Naeem Aslam.

"Today, we see bargain hunting," Aslam said.

"However, these bargain hunters know that risk related to the coronavirus variant are still significant."

Analysts remain cautious over the outlook owing to ongoing uncertainty over the Omicron variant and its broader economic impact.

"With heightened uncertainty currently the order of the day, a sustained relief rally is too early to call," warned Interactive Investor analyst Richard Hunter.

Asian markets, however, extended losses Monday but oil rebounded strongly as investors try to assess the threat of the new Omicron Covid strain on the global economic recovery.

Stock markets and oil prices had plunged Friday after the emergence of the variant.