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European Shares Set for Cautious Open on Fears Over Spain

European markets are set for a mixed open on Wednesday after the Catalonian region in Spain asked for a financial lifeline from the national government, raising concerns that the country itself will soon ask for a bailout.

The FTSE 100 is called down 10 points at 5,766 while the  German DAX is expected to fare better opening at 7,008, up 5 points and the French CAC 40 at 3,439 up 7 points.

Catalonia became the latest region to ask for a lifeline from the Spanish government when it asked for 5 billion euros ($6.2 billion) to shore up its banks, further cementing fears that the country itself will follow and ask for more financial assistance from the euro zone.

Spain’s Prime Minister Mariano Rajoy denied that his country needs a bailout, reiterating on Tuesday his calls that . “There isn’t any negotiation about this issue,” he told a press conference in Madrid after holding talks with visiting European Council President Herman Van Rompuy. “Because we have not made a request…we are not negotiating anything,” he said.

Despite Rajoy’s protestations, the country’s economy is in recession, confirmed by the latest second quarter GDP figures released on Tuesday, which showed the country’s economy contracted for the third consecutive quarter and by 1.3 percent from last year.  Deposit flight is an immediate problem for the country’s already struggling banks as deposits fell by 4.7 percent from June to July.

Elsewhere in the euro zone, German Chancellor Angela Merkel is meeting Italian Prime Minister Mario Monti on Wednesday before heading to China for the second time in 2012 on something of a diplomatic trade mission to convince China that the euro zone is still a safe place in which to invest, according to Reuters.

In earnings, interim results are expected from French hotel group Accor , mining company Antofagasta and Irish betting company Paddy Power .  Russian oil company Lukoil reports second quarter earnings and Serco , the British-based service company, reports earnings for the first half of the year.

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