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European Stocks Seen Higher; Greece in Focus

European stocks are expected to build on Monday's gains and open higher at the open on Tuesday.

Close-up of a pen on stock price chart
Close-up of a pen on stock price chart

On Monday, Wall street closed sharply higherfollowing news that hurricane Irene had not caused as much damage as first feared. Some strong data on consumer spending also supported stocks.

Following a one day public holiday in the UK, the FTSE 100 will reopen and is seen by spread betters in London trading up by 145 points as it plays catch up.

Gains on Wall Street were made in thin volume as many people struggled to get into the office after Irene hit much of the east coast. The gains came despite a report from ANSA news agency in Italy saying the International Monetary Fund is expected to downgrade its US growth forecasts for 2011 and 2012. ANSA said it had obtained an advance copy of the World Economic Outlook ahead of its release.

On Monday data from the European Central Bank showed it bought fewer euro zone bonds last week. An Italian bond auction on Tuesday is expected to see yields fall due to ECB support.

On Monday ECB President Jean-Claude Trichet told EU nations to get their act togetheron the debt crisis in a speech to the European parliament.

"The fact that markets are dysfunctional is, in our opinion, the responsibility of governments," said Trichet in Brussels. "They are issuing their own securities. They have the responsibility for the credibility of their own securities."

The comments came just before Italian Prime Minister Silvio Berlusconi's government announced it was dropping a tax on high earners whilst scaling back cuts for local governments in Italy. The amendments to the 45 billion euro austerity measures which have led to tense talks, gave few clues on how this extra money will be made up in order to meet the terms of an agreement with the ECB.

In Athens the government will meet for talks with representatives of the EU, IMF and ECB for talks over its deficit which are widely expected to be "tense"

On Monday sentiment had improved in Greece by news of a merger between the country's second and third biggest banks, but overnight the International Accounting Standards Board (IASB) is reported by the Financial Times to have written a letter to the EU market regulator criticizing inconsistencies in the way financial institutions have written down the value of their Greek debt.

Meanwhile Jean-Claude Juncker, the chair of the euro group promised an agreement on a Finnish proposal to demand collateral from the Greeks in return for any loans given under the terms of the latest rescue package.