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European shares dip, euro steady ahead of ZEW, Fed

European shares and Italian bonds edged lower on Tuesday as political turmoil in Italy weighed on confidence, but moves were subdued as investors waited for German confidence data later and the U.S. Federal Reserve's end of year meeting.

Following some disappointing euro zone data this month, the ZEW survey of German business sentiment will be released at 5 a.m. EDT, with investors hoping for signs of a pickup in confidence.

Markets were rattled on Monday by Italian Prime Minister Mario Monti's announcement he would step down early, and the pan-European FTSEurofirst 300 share index <.FTEU3> dipped 0.1 percent as trading resumed with concern continuing to weigh.

London's FTSE 100 , Paris's CAC and Frankfurt's DAX started mixed, while Milan's FTSE MIB lost another 0.2 percent following Monday's sharp drop.

"There's no doubt Monti's resignation raised some concerns," said Katsunori Kitakura, associate general manager of market making at Sumitomo Mitsui Trust Bank.

The other main focus for investors is the Federal Reserve meeting on Wednesday. It is expected to extend its asset purchase scheme and commit to buy $45 billion of U.S. debt per month.

On the bond market, German Bund futures opened slightly stronger, with focus for the session likely to be back on Italian politics. Bund futures were 10 ticks higher at 145.71 while Italian bonds continued to hurt, with yields up 7 basis points to 4.88 percent.

Late on Monday Monti had played down market fears over his decision to resign, saying there was no danger of a vacuum ahead of an election in the spring.

The comments helped the euro find some support, as it hovered above a two week low at $1.2945, up around 0.1 percent from late U.S. levels.

(Reporting by Marc Jones; Editing by Peter Graff)

(This story was corrected to fix the time of ZEW survey release to 5 a.m. EDT from 4 a.m. EDT in the second paragraph)