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FTSE, CAC, DAX to Open Flat; Credit Ratings Warnings Weigh

European stocks were called to open flat to slightly higher on Tuesday after disappointing overnight trade in Asia, where stocks fell and the euro hit close to two-month lows amid fears that the euro zone might not avoid mass credit downgrades.

The FTSE is called 15 points higher, the DAX in Frankfurt is expected to open up by 14 points and the CAC 40 is called higher by 7 points.

Markets continue to be unconvinced by the 'solutions' put forward by EU leaders at last week's summit and a move by Moody's Investor Service to place eight Spanish banks on review for possible downgrade late on Monday followed earlier warnings from Moody's and Fitch Ratings on the credit worthiness of European nations.

Moody's said it intended to review the ratings of all 27 members of the European Union, including the ten EU member states not in the euro zone. Fitch added that no "comprehensive" solution had been reached at the summit and European credit ratings remained under pressure.

Standard and Poor's stepped up pressure on euro zone leaders last week when they warned that 15 euro zone nations had been placed on credit watch negative, but they have yet to announce a decision.

The FT reported on Tuesday that the chairman of the UK's financial regulator, the Financial Services Authority believes hostile takeovers of banks should be banned. Adair Turner told the newspaper such takeovers should "either be completely banned or the regulator should have the power to block them."

Turner's comments follow a report by the FSA into the near bankruptcy and subsequent bailout of Royal Bank of Scotland by the British government in 2008.

The report found that RBS made a fatal mistake with its hostile takeover of Dutch lender ABN Amro in 2007 and subsequent exposure to the US sub prime mortgage market.

Reuters reported on Monday that Germany's second largest bank, Commerzbank , was in talks with the German government over possible state aid and meetings had been taking place for several days. The lender is 25 percent owned by the German government, but CFO Eric Strutz said on Monday that the bank wished to avoid further government support.

CNBC's Annette Weisbach spoke to the bank on Monday and they insisted there was no imminent state aid.

Spanish Prime Minister elect Mariano Rajoy will be confirmed as Spain's new prime minister on Tuesday, succeeding Socialist Jose Luis Rodriguez Zapatero. Rajoy's conservative People's Party (PP) defeated Zapatero's Socialists in a general election last month.

In Paris, a conference on the problems of youth unemployment will begin on Tuesday at the headquarters of the OECD. The European Youth Forum will hold a press conference at 12:00pm UK time and launch its new publication on youth unemployment in Europe.

A number of bond auctions will take place on Tuesday starting with a Spanish auction of 12 and 18-month bills at 9:30am London time. Greece will hold an auction of 6 month bills at 10:00am and the first short term European Financial Stability Facility bill sale will be held with results expected around 10:00am London time.

Economic data to watch on Tuesday includes UK monthly inflation figures for November at 9:30am and the ZEW Indicator of Economic Sentiment from Germany is available from 10:00am UK time.

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Contact Europe: Economy

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