European stocks were called to open higher on Tuesday following a downgrade of the euro bailout fund - the European Financial Stability Facility (EFSF) - by credit rating agency Standard & Poor's late on Monday.
The FTSE is called 37 points higher, the DAX in Frankfurt is expected to be up by 25 points and the CAC 40 is called higher by 12 points.
Just three days after downgrading nine euro zone countries, rating agency S&P cut the credit rating of the EFSF from AAA to AA+.
The downgrade followed cuts to the credit ratings of France and Austria, two of the bailout fund's guarantors, but French Finance Minister Francois Baroin said late on Monday that there was no need to shore up the EFSF for the time being.
In Asia overnight, stocks climbed slightly higher while the euro managed to hover just above a 17-month low.
Wall Street will reopen on Tuesday following a federal holiday to celebrate the birth of civil rights leader Martin Luther King Jr.
Fourth quarter GDP data from China showed the economy grew by 8.9 percent, its slowest rate for two and a half years. It remains unclear whether the Chinese government will decide to ease monetary policy yet again, but the debt crisis in the euro zone is likely to weigh on exports in the next quarter.
In an interview with the FT, Italian premier Mario Monti said euro zone leaders must do more to help Italy drive down its borrowing costs and other troubled euro zone economies. Pointing to Germany, Monti said it was in "its own major self interest" to help lower borrowing costs, as Europe's major creditor.
European Central Bank President Mario Draghi expressed optimism that euro zone governments are acting to balance their books, but he added that Europe remains "in a very grave situation" in a statement late Monday.
In corporate news, Japanese firms SMFG and Sumitomo confirmed late Monday that they will buy the aircraft leasing business of embattled British bank Royal Bank of Scotland, RBS Aviation. The $7.3 billion dollar deal will see SMFG take around 70 percent of RBS Aviation, while the rest will be purchased by Sumitomo. The sale of RBS Aviation marks the biggest for the bank so far, since it began significantly downsizing following a bailout by the British government three years ago.
Four bond auctions to watch on Tuesday include a 5-6 billion euro sale of 12 and 18-month Spanish bonds at 9:30am London time. That will be followed by Greece which will hold an auction of 13-week treasury bills at 10:00am. Belgium is due to tender 3 and 12-month bills at 10:30am and the recently downgraded EFSF will hold a sale of 6-month bills at 11:00am.
Airbus will hold its annual press conference in Hamburg on Tuesday with CEO Tom Enders in attendance. The aircraft manufacturer will announce its annual order totals and sales achieved in the last year.
In Britain, Bank of England Governor Mervyn King will appear before the Treasury Select Committee to discuss the Bank's Financial Stability Report, published in December. The committee session will begin at 9:45am London time.
In Paris, French Finance Minister Francois Baroin and Budget Minister Valerie Pecresse will hold their new year press conference, while UK Finance Minister George Osborne will begin the second day of a three day tour of China and Japan.
Workers at Anglo-Dutch consumer goods producer Unilever will stage a day of strikes on Tuesday at sites across the UK to protest against the closure of the company's final salary pension scheme. Thousands of workers are expected to take part in the strikes.
In a busy day on the corporate front, German retailer Metro announced a 1.3 percent decline in third quarter sales on Tuesday.
Swiss chocolate maker Barry Callebaut saw volume growth slow to 2.6 percenton Tuesday,hit by weak demand in Europe, while inspection services company SGS posted a 9.2 percent drop in full-year net profit, but said it expects strong growth in 2012.
British luxury goods retailer Burberry posted a 22 percent jump in third quarter revenue on Tuesday due to particularly strong sales in Asia, while electrical retail group Dixons said underlying sales were down 5 percent over the Christmas period.
Rio Tinto releases its fourth quarter output data on Tuesday and the UK's biggest spread betting provider IG Group will report interim results.
Economic data to watch includes UK CPI at 9:30am London time and EU harmonized CPI at 10:00am.