International ratings agency, Moody's has downgraded Europe's largest economy, Germany citing concerns that Spain and Italy might require further bailouts.

The agency believes that the large bailouts that might be required by large economies of Spain and Italy will have to be backed by the Garman nation. The ratings agency also downgraded Luxembourg and the Netherlands adding to the pressure in the troubled Eurozone.

Investors are eagerly waiting for the release of euro zone purchasing manager's indexes (PMIs) for July. HSBC's estimates have showed that China's manufacturing sector have risen to its five month high due to new orders in the international markets.

The FTSEurofirst 300 index of top European shares was 0.4 percent higher at 1,027.93 points in early trade this morning.

Meanwhile, Eurozone countries have agreed to a bailout package worth $ 122 billion to help Spanish banking sector come out of its current turmoil. The agreement comes amid speculation that they Spanish government might be forced to ask for a bailout from the European Union.

The finance ministers of 17-nation euro group reached an agreement of a financial support for Spanish banks in a video conference on Friday. A day earlier, the German parliament had approved the plan with a large majority. Luxembourg's Prime Minister and president of the euro group Jean-Claude Juncker said that the finance ministers agreed that the extending loans to the Spanish banking sector is required to maintain the stability in the Eurozone.