Regional politics will guide Middle East investors on Tuesday, with bargain hunters looking for opportunities in Egypt should the country's political crisis ease.
Egypt's Supreme Judicial Council has cleared the way for a referendum on a new constitution which President Mohamed Mursi hopes will ease tensions between his Islamist supporters and opponents.
Widespread protests broke out recently over a decree Mursi issued on November 22 that greatly expanded his powers.
Cairo's benchmark index lost 1.4 percent on Monday, edging towards last week's four-month low on fears that a conflict between the judiciary and government bodies would intensify.
"Internal issues are overshadowing [international] story lines, which have faded to a certain extent," says Akber Naqvi, hedge fund portfolio manager at Al Masah Capital.
"Europe is not as volatile. It's obvious why regional markets are looking inwards. Once it changes, they could go back to following the international lead."
In Kuwait, the ruler accepted the government's resignation on Monday, a step designed to make way for a new cabinet after parliamentary elections boycotted by the opposition.
Under the constitution, a new government must be formed before the first session of the new parliament. Emir Sheikh Sabah al-Ahmad al-Sabah said the new parliament would convene on December 16.
The chamber is expected to be more cooperative with the government than its predecessor because of the opposition boycott of the vote.
Analysts hope this will kick-start a long-stalled KWD30bn (US$106.50bn) development plan.
In the United Arab Emirates, trading will resume after a two-day public holiday for National Day.
Elsewhere, Asian shares slipped on Tuesday after a plunge in US manufacturing activity hit American stocks and the dollar, while the euro hovered near a six-week high on optimism over Greece's plan to buy back debt.
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