Europe Economy

FTSE, DAX and CAC Set for Further Losses at Open

European stocks are expected to add to Monday's losses at the market open with all three major indexes due to start trade in the red.

Traders sit in front of their screens at the stock exchange in Frankfurt/Munich, western Germany.
Martin Oeser | AFP | Getty Images

Asian stocks followed Europe's leadon Monday with the US market shut for Labor Day, but selling was not as heavy as had been feared following a fall of more than 5 percent for the German market.

In an interview to air on Tuesday on CNBC former German Chancellor Gerhard Schroeder told Chancellor Angela Merkel to stop Greece-bashing and focus on finding a solution, together with France, to the euro zone crisis.

His comments, in an exclusive interview with CNBC, came after Schroeder used a rare television interview to predict the creation of a United States of Europe.

The big question for Tuesday's session could very well be whether the ECB has lost control of the Italian bond market or is simply allowing a rise in Italian borrowing costs in order to put pressure on Silvio Berlusconi's government over austerity measures.

Following an agreement between Italy and the ECB last month the central bank began to buy Italian bonds and push borrowing costs lower. This deal was in return for big austerity measures by Rome, which have since been watered down. Mohamed El-Erian, the co-CEO of PIMCO told he would be very worried about sentiment if the ECB has actually lost control of Italian yields.

Nouriel Roubini told CNBC that Italy would benefit if Prime Minister Silvio Berlusconi left office.

With German 10-year debt yields trading below 2 percent following a flight to safety on Monday, Greece will be closely watched on Tuesday. Late on Monday ECB President Jean-Claude Trichet offered some support for the government in Athens saying he is convinced Greece will take the right action to avert and even worse crisis.

At a meeting in Berlin on Tuesday, the German finance minister will meet his Finnish counterpart to discuss Finland's demands for collateral to be put up against any loans given to Greece.

Germany will be hoping the demand will be dropped but the Finns are likely to want some assurances they are not throwing good money after bad as others look on wondering why they don't also have some protection.

A busy week will end with G7 finance ministers meeting in France. The Reuters news agency reports that the talks will focus on ways to prop up global growth with commitments to keep monetary policy accommodative and slow the pace of fiscal consolidation where possible.

Join CNBC's Squawk Box Europe from 0600 London time where we will bring you that exclusive interview with former German Chancellor Gerhard Schroeder. Steve Sedgwick reports from Rome and CNBC's Guy Johnson is on his way to Athens.