European stocks extended the new year rally on Tuesday, led by economy-sensitive travel, banking and commodity stocks on fresh signs that the Omicron virus variant might be less severe than initially feared.

The pan-European STOXX 600 index rose 0.6% to 493.1 points, hitting a record high after Wall Street's S&P 500 and Dow closed at all-time highs overnight. .N

Europe's travel & leisure index jumped 3.3% to its highest in more than six weeks. British airlines shone, with Ryanair and British Airways-owner IAG climbing 9%-10%, while Wizz Air jumped 10% after reporting a surge in December traffic.

London's FTSE 100 gained 1.3%, catching up with a global rally as trade resumed after a long holiday weekend.

"There are tentative signs that this variant may not be as bad as feared," Max Kettner, chief multi-asset strategist at HSBC, said in a note.

"UK hospitalisations have increased in the past couple of days, but the link clearly appears to be weaker than during the previous winter wave. As such, the sensitivity of cases to hospitalisations has barely budged so far. If that trend was to continue, that's good news."

Britain's vaccine minister said people being hospitalised with COVID-19 in the United Kingdom were broadly showing less severe symptoms than before. 

French Finance Minister Bruno Le Maire said although the surge of the fast-spreading Omicron variant was disrupting some sectors, there was no risk of it "paralysing" the economy, and stuck to a forecast of 4% growth for 2022 GDP. 

Stock markets in Europe and the United States hit a series of record highs in 2021 as vaccine rollouts and huge stimulus packages to boost the pandemic-hit global economy offset worries about persistently high inflation and new COVID-19 variants.

The STOXX 600 gained 22.2% last year, while New York's S&P 500 climbed 26.9%.

European banks .SX7P jumped 2.1% to November highs as government bond yields on both sides of the Atlantic got a boost from expectations of tighter monetary policy.

Stay-at-home stocks including food delivery companies Delivery Hero and Just Eat Takeaway.com fell more than 2%, while healthcare names Novo Nordisk, Roche and AstraZeneca were among the top drags on the STOXX 600.

Meanwhile, data showed German unemployment fell more than expected in December, in a further sign that the labour market in Europe's largest economy remains resilient despite rising COVID-19 infections.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Subhranshu Sahu) ((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6182 2787;))