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European Markets to Lose Momentum on Euro Zone Uncertainty

European markets are called to open in negative territory on Tuesday as the debate continues over how far the European Central Bank (ECB) can, or will, go to save the euro zone.

The FTSE 100 is called to open down 15 points at 5,762, the German DAX down 37 points at 2,010 and the French CAC 40 down 21 points at 3,442.

European shares have rallied recently on expectations that the ECB will formally announce its bond-buying plan to help struggling economies like Spain and Italy with their borrowing costs, but debates have raged over the legality or utility of such a policy.

ECB official Jorg Asmussen tried to counter fears from officials at the German Bundesbank that such a policy could violate ECB lending rules to governments, by saying that the central bank is now working on details of its bond-buying plan.

Speaking at a Bundesbank event on Monday, Asmussen said the ECB “would only act within its mandate” in providing finance to struggling euro zone states.

In the bond markets, Italy will sell up to 3.75 billion euros ($4.68 billion) of zero-coupon and inflation-linked bonds on Tuesday and Spain aims to sell up to 3.5 billion euros of short-term bonds. As Spanish Prime Minister Mariano Rajoy prepares to meet European Council President Herman Van Rompuy on Tuesday, speculation continues over whether Spain will ask for further aid from the euro zone.

Tropical Storm Isaac is continuing to wreak havoc in the U.S., and reached the northern coast of the Gulf of Mexico this morning. It is expected to make landfall between Florida and Louisiana on Wednesday when it is expected to reach hurricane strength.

In earnings, French bank Credit Agricole and cosmetics company L'Oréal release interim results and security firm G4S and distribution group Bunzl release earnings for the first half of 2012.

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