Matt Buckland, a dealer at CMC Markets, said in light of the recent movements in equity markets, traders are trying to establish just how far along any economic recovery actually is.
"If... we realise that a complete turnaround is still someway off, then we could well see the bears come back for another run lower on the major indices," Buckland said.
He forecast that London's FTSE 100 index would open down 34 points, or 0.7%, at 4862.0, Frankfurt's DAX down 49, or 0.9%, at 5470 and Paris's CAC-40 down 33, or 0.9%, at 3619.0.
The economic and corporate agendas are busier Tuesday, which should help to offer equity markets some direction. Air Berlin and Banca Popolare Milano release second-quarter results, while Cairn Energy issues its interim statement. In France, President Sarkozy will be meeting banks' bosses to talk about bonuses and lending conditions.
Meanwhile, Asian stock markets were mostly weaker, dragged down by a sharp fall in Chinese stocks. The Shanghai Composite index was down 4.2%
"Domestic investors are not that optimistic," said Kazuhiro Miyake, chief strategist at Daiwa Institute of Research in Tokyo. "Although there are signs of improvement in the global economy and corporate earnings, the question is whether or not it will last," and investors were closely watching U.S. economic indicators.
Japan's Nikkei 255 was down 0.8% while Hong Kong's Hang Seng index was hit by Chinese stock weakness, falling 1.1%. Taiwan shares reversed earlier gains and the index was 0.4% lower. South Korea's Kospi Composite extended its losses, falling 0.3%.
China's shares were down as the central bank commenced its sale of CNY50 billion of one-year bills, up from the CNY45 billion of bills offered last week. "The bigger size of PBOC bills [offered] this week adds pressure on market liquidity," said Capital Securities analyst Jacky Zhang.
Friday's approval of railway transportation equipment maker CNR Corp.'s plans for an initial public offering was also raising concerns about tighter liquidity in the stock market.
Elsewhere, U.S. stocks were mixed Monday. The Dow Jones Industrial Average rose 0.03% to 9509.3. But the Nasdaq Composite dropped 0.1% to 2018.0 and the Standard & Poor's 500-stock index shed 0.05% to 1025.6.
Both the Nasdaq and the S&P 500 snapped four-session winning streaks. "The volume was just about as slow as we've seen all summer," said Art Hogan, chief market analyst at Jefferies. "But it could be the quiet before the storm with all the economic data, especially related to housing, that we expect this week."
News that U.S. President Barack Obama will announce the nomination of Ben Bernanke to a second term as Federal Reserve chairman Tuesday had little impact on markets as it was widely expected. The news was considered a mild positive.
In the foreign exchanges, the dollar and the euro were both lower against the yen, weighed down by Japanese exporters' sales as well as an unwillingness to take on risk as stock markets weakened.
The dollar was trading at Y93.96 at 0625 GMT, down from Y94.57 in late New York business Monday, while the euro was at $1.4291, down from $1.4304, and at Y134.26, down from Y135.28.
Elsewhere, base metals were lower, weighed down by weak stock markets, and spot gold eased to $945.00 per troy ounce, down 63 cents from the New York close. Also, the October Nymex crude oil futures contract was down 77 cents at $73.60 per barrel.
In light of the expected weakness across equity markets, European government bonds were seen higher. At 0630 GMT, the September bund future was up 0.36 at 122.37.
