European shares tiptoed around four-month highs and the euro remained buoyant at $1.24 on Tuesday, as the prospect of formal central bank support for euro zone bond markets in the coming weeks kept markets cautiously optimistic.
Markets have enjoyed a strong run in recent days after robust U.S. jobs data eased concerns about global growth, and the Frankfurt-based European Central Bank promised to bring control back to strained parts of government borrowing markets.
"Markets are likely to remain driven by headlines (on the euro zone crisis), waiting for action before distinctly moving in either direction," said Bill O'Neill, Chief Investment Officer for Europe, Middle East and Africa, Merrill Lynch Wealth Management.
"The lack of a large-scale policy response continues to push a formal bailout request by Spain as more probable than possible."
Major European stock markets saw a quiet opening, with the FTSEurofirst 300 (.FTEU3) little changed at 1,084.58 points.
Banks (.SX7P), which have rallied more than 12 percent over the last nine days, were among the top fallers, however, as more scandal hit the sector after the New York State Department threatened to strip Standard Chartered (STAN.L) of its state banking license due to alleged Iranian dealings in contravention of U.S. sanctions.
Alongside the euro zone's woes, investors are also focusing on how key developed and emerging economies are holding up.
Germany, which is now showing signs of wear from the debt crisis, reports factory data on Tuesday, while preliminary figures from Italy will reveal how badly its economy fared in the second quarter.
Later in the week U.S. mortgage data on Wednesday and Chinese industrial production, retail sales and inflation data on Thursday could also help determine the market's near-term direction.
The euro was broadly flat at $1.24 at 03.30 a.m. EDT.
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