European stocks were called to open higher on Tuesday after closing at a 6-week low the previous day and despite falls on Wall Street and in Asia overnight as investor confidence waned over the ability of US and European lawmakers to resolve their debt crises.
The FTSE was called 36 points higher, the DAX in Frankfurt was expected to open up by 36 points and the CAC 40 was called higher by 25 points.
On Monday the US joined the European Union as the latest administration fuelling investor concerns and a flight from riskier assets as the bi-partisan "super committee" tasked with coming up with a plan to reduce the nation's deficit, admitted defeat. By the end of US trading, stocks were down by around 2 percent, tracking declines in European stock markets earlier in the day.
Despite the failure of US lawmakers to agree on a coherent deficit reduction plan, credit rating agencies Moody's, S&P and Fitch all said late Monday that there would be no immediate downgrades of their US credit ratings. However, Fitch said it could cut the outlook on its "triple-A" rating of the United States, with a downgrade an unlikely possibility.
President Barack Obama told a press conference late on Monday that bi-partisan efforts had failed due to resistant Republicans in Congress and he stressed the situation had improved since the deadlock of August, but he would push ahead with plans to drive down US debt. Obama said Democrats were still prepared to "come up with a balanced plan" on the budget, but he warned that he will veto any attempt by Congress to scupper a $1.2 trillion spending cut plan.
In Europe, Spanish Prime Minister-elect Mariano Rajoy continued to talk up plans to cut spending and get people back to work, but he said the Spanish constitution will prevent him from naming a new government – and economy minister – until December 25. The Spanish Treasury is likely to have to pay steep interest rates at an auction of up to 3 billion euros ($4 billion) of bills on Tuesday morning, with results due around 9:40 London time.
A Spanish government spokesman confirmed on Monday that the nation's Treasury asked Bloomberg LP and Thomson Reuters to change their benchmark bond prices because they claimed they were inaccurately reflecting the spread between Spanish 10-year bonds and German bunds.
The World Bank warned early Tuesday that the Chinese economy is under real threat from the crisis unfolding in the euro zone and regional Chinese government debt, but the bank also said the Chinese could guard against such threats with more monetary policy easing. The bank increased its 2011 growth forecast for China, but expects growth to moderate from next year.
Italian Prime Minister-delegate Mario Monti will meet European Council President Herman Van Rompuy on Tuesday in Brussels on Tuesday and he is also due to meet with the President of the European Commission Jose Manual Barroso, from around 2pm London time.
European Union staff are expected to stage a protest in Brussels over plans to increase their working week from 37.5 hours to 40 hours, raise their retirement age and award a pay rise of just 1.8 percent.
In London, UBS rogue trader Kweku Adoboli is due to appear in court accused of unauthorized trading which the bank claims cost it in the region of $2.3 billion. Adoboli, who has been in custody since September, will have the chance to enter a 'guilty' or 'not guilty' plea.
UK public sector finance data for October will be released at 9:30 on Tuesday morning.