European stocks were called to open lower on Wednesday after Asian shares, US futures and oil prices dropped on weak flash PMI data out of China, showing factory activity levels at their lowest since March 2009.
Fears are growing that the Chinese economy will not withstand an onslaught of depressing economic news from Europe and the US, where gross domestic product forecasts have been revised downwards.
The FTSE is called 67 points lower, the DAX in Frankfurt is expected to open lower by 72 points and the CAC 40 is called 48 points lower.
Belgian newspaper De Standaard reported that Belgium and France are holding fresh talks over the conditions of a rescue package they agreed for troubled bank Dexia and the euro fell as low as $1.3452 against the US dollar in Asian trading following the news.
Citing no sources, the newspaper wrote that the Franco-Belgian discussions were related to the distribution of costs between the two countries, but Belgian Finance Minister Didier Reynders denied the recent deal would be replaced.
The news brings struggling European banks back into focus and European Union Internal Market Commissioner Michel Barnier said on Tuesday that the European Union was bringing together a committee to look into the possibility of splitting the retail and investment arms of the continent's banks.
Plans to separate retail banking from riskier investment activity have already been proposed in the US and the UK, where a government appointed banking commission is exploring the possibility.
In the US, the Federal Reserve announced it will carry out stress tests on six of America's largest banks to investigate how they would cope with a 'global market shock scenario' such as a severe euro zone recession. The Fed said the tests would be based on price and rate movements in the second half of 2008 and "potential sharp market price movements in European sovereign and financial sectors."
The banks to be tested are Bank of America, Citigroup , Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo.
The IMF announced a fresh precaution against the impact of the European sovereign debt crisis on Tuesday with the launch of a six-month liquidity line for countries with relatively solid economies, but which might be at risk from sovereign debt contagion.
The IMF said a more rigorous lending instrument for countries not yet directly impacted by European debt problems was "insurance against further shocks" and designed "to address the needs of crisis bystanders."
French President Nicholas Sarkozy and German Chancellor Angela Merkel have called for a treaty change in Europe to allow European authorities to intervene in the national budgets of euro zone countries. The French President told an Asian forum in Paris that the aim of the treaty change was to "prevent countries from diverging in the budgetary, economic and fiscal areas."
The FT reported that the European Commission will call for new powers to send fiscal inspectors to troubled common currency countries without invitation from individual governments and is pushing for a requirement that euro zone states submit tax and spending plans to the EU before announcing budgets to their national parliaments.
In Dublin, the Irish Business and Employers Conference will begin on Wednesday with over 400 business leaders and CEOs expected to attend the annual event, where they will discuss opportunities for growth and prospects for the Irish economy.
Top Asian business leaders with gather in Paris on Wednesday for the third International Capital Conference which will be attended by French Finance Minister Francois Baroin.
The EU Commission will release a paper on euro bonds along with the Commission's Annual Growth Survey for 2012.
A press conference with European Commission President Jose Manuel Barroso is expected around 11:30 UK time.
Economic data to watch includes French flash PMI at 8:00, followed by Germany at 8:30 and the euro zone at 9:00.
The Bank of England Monetary Policy Committee meeting notes for November will be released at 9:30 London time.