Europe Economy

Stocks to Open Flat; Slovakia Vote Watched

European stocks were called broadly flat on Tuesday as shares rose for a fourth straight trading day on Monday, buoyed by a Franco-German pledge to act within the next month to recapitalize troubled euro zone banks in a bid to resolve the European sovereign debt crisis.

Close-up of a pen on stock price chart

The FTSE was called 3 points lower, the DAX in Frankfurt  was  expected to open up by 9 points and the CAC 40 was predicted to start the day flat.

Tuesday will thrust tiny euro zone nation Slovakia into the spotlight once again as the nation's parliament votes on whether to support an expansion of the euro zone's rescue fund, the European Financial Stability Fund (EFSF)

The Slovak parliament's budget and finance committee voted on Monday recommending that the full parliament should back plans to strengthen the EFSF, but the committee's head said they might have fallen short by one vote in approving the recommendation, Reuters reported. 

The technicality is unlikely to affect a vote by the Slovak parliament today, but the result still hangs in the balance as the ruling right-wing coalition's junior partner, the Freedom and Solidarity Party (SaS), rejected a compromise offer from Prime Minister Iveta Radicova on Monday.

In Asia overnight, shares followed Wall Street where a late rally suggested investors remain optimistic that euro zone leaders will take action to shore up the region's troubled banking sector.  In China, stocks opened 2.4 percent higher, following the news that the nation's sovereign wealth fund would increase its stake in the country's four largest banks, but entered negative territory in late trading.

The euro made its biggest daily gain against the dollar for 15 months in Asian trading on Tuesday amid hopes over a euro zone debt solution.  The common currency last traded at $1.3627, slightly down from a session high of $1.3698.  The euro also rose against the yen, reaching a three week high of 104.46 against the Japanese currency.

The Slovak parliament will begin debating the EFSF at 12:00 London time, with a vote expected later in the afternoon. 

In France, a demonstration will begin in Paris at 1pm UK time against government austerity plans announced in August. The protest is not expected to cause major disruption and is due to end around 5pm.

Greece will auction 1 billion euros ($1.343 billion) of six month T-bills on Tuesday as part of its monthly short term debt sales, while outgoing European Central Bank President Jean Claude Trichet will appear before the European Parliament's finance committee at 9:30 London time.

Economic releases out on Tuesday include UK industrial production figures for August at 9:30. Spanish lender Banco Espanol de Credito is due to release its third quarter results.

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