Europe Economy

European Stocks Seen Higher as Investors Watch Banks

European stocks were expected to open higher on Monday after finishing lower on Friday's close, weighed down by disappointing US growth data which showed GDP shrank to a new low of 1 percent.

Close-up of a pen on stock price chart

Federal Reserve Chairman Ben Bernanke stopped short of announcing fresh quantitative easing measures in his highly anticipated speech in Jackson Hole, Wyoming, on Friday, but did confirm that the Fed would be willing to use a variety of methods to aid the faltering recovery.

Bernanke's speech, which followed the release of US GDP data, helped European markets trim losses before the close.

However, Bernanke could be forced into announcing clearer plans for the US economy this week as investors look toward Friday when US jobs data is released.

London's FTSE will be closed on Monday due to a public holiday in the UK, but Germany's DAX is called 71.5 points higher, and the CAC 40 in France is called 34 points higher.

Christine Lagarde came under fire from European policymakers on Sunday following her Jackson Hole address where she called for an "urgent" capitalization of Europe's weakest banks.

Lagarde said the move was necessary to ensure "chains of contagion" were eradicated in the euro zone, but EU officials attacked the former French Finance Minister for making a "confused" and "misguided" attack on the health of European banks.

The Sunday Times of London reported that European officials were working on a "radical plan" to avoid a new pan-European credit crunch, with the paper claiming that officials at the European Central Bank and European Commission were considering offering central guarantees over certain types of debt issued by banks.

Europe's banks will remain in focus on Monday following the announcement of a merger between Greek lenders Alpha Bank and Eurobank whose shares have been suspended ahead of a board meeting.

Monday's corporate releases include interim results for Italian banks UBI Banca and Banca Popolare di Sondrio.

Japan chose a new Prime Minister on Monday following the resignation of deeply unpopular Naoto Kan last week. Yoshihiko Noda, considered best positioned to tackle Japan's massive public debt, won the ruling party vote to take the helm.

France, Italy, Belgium and Spain will resume their ban on short-selling of bank and financial sector shares on Monday after an initial ban expired last Friday.