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FTSE, DAX, CAC Set for a Rebound

European stocks were expected to open higher on Wednesday after all the main indexes closed down on Tuesday amid fears that the continent’ banks faced a worse-than-feared threat from the euro zone.

The FTSE [.FTSE 4944.44 -131.06 (-2.58%) ] is called 67 points higher, the DAX [.GDAXI 5216.71 -159.99 (-2.98%) ] in Frankfurt is expected to open up by 90 points and the CAC 40 [CAC40 2850.55 --- UNCH (0) ] is predicted to be higher by 47 points.

The STOXX Europe 600 Banking Index [.SX7P 124.80 --- UNCH (0) ] ended the day 4 percent lower but off a session low of 5.6 percent on Tuesday, while the FTSE closed down 2.58 percent to 4944.44, hitting its lowest closing value since July 2010.

The European Union’ commissioner for economic affairs, Olly Rehn told the Financial Times that EU finance ministers had agreed to look at the capital positions of Europe’ banks and were considering plans to coordinate recapitalizations at their meeting in Luxembourg.

Rehn conceded that euro zone policymakers had failed to do enough to calm market fears that the banks may not withstand the current crisis and the news prompted a late rally on Wall Street after a tumultuous day.

However, the announcement preceded another downgrade of Italy’ credit rating by Moody’ from Aa2 to A2 which came just after Wall Street closed for the day.

In Asia overnight, stocks lost earlier gains as investors remain concerned about the euro zone’ ability to cope with the debt crisis despite fresh assurances that euro zone finance chiefs will act to safeguard banks.

The euro edged closed to a nine-month low of $1.3145 against the dollar in Asian trading on Tuesday before recovering slightly to $1.3284 and against the yen, the common currency shed 0.8 percent to reach a near 10-year low of 101.82 yen before recovering slightly.

German Chancellor Angela Merkel will meet with President of the European Union Commission, Jose Manuel Barroso at 12:30 London time with a joint press conference due at 15:15. The prospect of a European financial transaction tax is likely to be on the agenda together with concerns over the next tranche of aid for Greece and action to be taken on the banking sector.

UK GDP figures for the second quarter of the year are out on Wednesday at 9:30 with trading statements also due on Wednesday from UK retail giants Tesco [TSCO-LN 380.10 --- UNCH (0) ] and Sainsbury’ [SBRY-LN 274.70 --- UNCH (0) ].

The second quarter GDP estimate for the European Union will be announced at 10:00.

A raft of service sector data from across Europe will also be released, starting with France at 8:50, Germany at 8:55, the EU at 9:00 and the UK at 9:30.