Europe Stocks to Open Flat, Debt in Focus

European stocks were expected to have a muted open on Monday as investors wait for the latest news from European Union officials on how to resolve the Greek debt crisis.

The FTSE [.FTSE 5965.36 -25.22 (-0.42%) ] is expected to open five points higher, Germany’s DAX [.GDAXI 7322.58 -80.15 (-1.08%) ] is predicted to be down by nine points and the CAC 40 [CAC40 3860.07 -53.48 (-1.37%) ] in France is called five points lower.

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The Financial Times reported that euro zone finance ministers will discuss in Brussels later on Monday a new bailout plan which would allow Athens to default on some of its bonds.

While still in early stages, it was reported that the plan contains provisions by European lenders to lower interest rates on Greece's bailout loans and a broad-based bond buyback. The euro traded slightly lower ahead of that meeting.

After Friday’s weak US jobs data, another piece of important news came over the weekend when it was announced that Chinese inflation is 6.4 percent, raising the prospect of Beijing putting in place further measures to tame rising prices and slow down growth.

With a raft of data from both the US and Europe due later this week, the focus of the market will be on President Obama’s attempt to get a deal on the debt ceiling and Italy, which some fund managers believe is now back in the sights of the bond vigilantes.

Following big losses for Italian banks like Unicredit last week the Italian market regulator on Sunday imposed new rules on disclosing short positions in an effort to curb stock volatility.

After comments from Silvio Berlusconi late last week indicating he has fallen out with Italian finance minister Giulio Tremonti, the Italian government spent the weekend attempting to show investors the government is united.

Away from the debt crisis, BSkyB [BSY.L 710.00 -40.00 (-5.33%) ] will dominate the press in the UK following a call from the leader of the main opposition party for Rupert Murdoch to drop his bid to take full control of the satellite broadcaster, as the investigation into phone tapping at the now shut News of the World continues.

In merger and acquisition news, Swiss food giant Nestle bid $1.7 billion for a 60 percent stake in the Chinese candy maker Hsu Fu Chi.