European shares were set to open sharply higher on Tuesday, with a report saying Germany was considering making concessions to facilitate a new aid package for Greece seen lifting sentiment.
Futures for Euro STOXX 50, for Germany's DAX and for France's CAC were up 0.8 to 0.9 percent.
Financial spreadbetters earlier predicted Britain's FTSE 100 to open as much as 0.7 percent higher.
"European markets are set to open higher on speculation that Germany will drop its insistence that Greek bondholders share some of the financial pain in exchange for new emergency loans," said Jonathan Sudaria, dealer at Capital Spreads.
The Wall Street Journal's online edition said Berlin's concession that it must lend Greece more money would help Europe overcome its impasse over Greece's funding needs before the indebted country runs out of cash in mid-July.
European Union officials said on Monday the EU was racing to draft a second bailout package for Greece to release vital loans and avert the risk of the euro zone country defaulting.
The FTSEurofirst 300 index of top European shares ended 0.2 percent lower at 1,132.71 points on Monday.
Volumes were thin as both US and UK markets were closed for a public holiday.
In Asia, stocks rose on Tuesday as investors responded to the news that Japan’s industrial and manufacturing activity was showing signs of rebounding after the earthquake in March.
However, credit rating agency Moody’s placed Japan’s sovereign ratings on review for possible downgrade, citing concerns about policy responses to sluggish economic growth prospects.
German nuclear power plant operators RWE and E.On fell 1.9 percent and 2.5 percent respectively on Monday’s news that Germany intends to close all of its nuclear reactors by 2022.
The euro jumped to a three-week high against the dollar Tuesday, on a report in the Wall Street Journal that Germany was ready to compromise to reach a deal on a second bailout for Greece.
The euro ended Monday 0.72 percent higher at $1.4326 at the end of an otherwise lackluster day due to holidays in the UK and US.
In politics, Eurogroup’s Jean-Claude Juncker said he is “quite optimistic” about a new aid plan for Greece, adding that a total restructuring of Greek debt is not an option.
But an unnamed EU official has said the EU may press Greek banks to be repaid later as part of a European Union plan to remedy the country’s dire budget outlook.
The official added any such move would need to be approved by other euro zone governments.
In Germany, May’s unemployment figures will be released at 09:00 am London time.
In France, April’s Producer Price Index will be released at 07:45 and unemployment data for the European Union will be available from 10:00.