Strong US jobs data on Friday set the tone for resilience in European equities next week as investors took heart from signs of economic growth, while trading updates from a batch of UK firms will be in focus.
European investors will scour economic data to gauge where borrowing costs around the world are heading, after statements from banks led many to conclude the worst of a credit crisis may be past. Key economic news out in Europe next week includes Eurozone second-quarter GDP, UK Price Production Index figures for September and Italian industrial production data.
Strategists say investors are likely to focus mainly on key economic data from across the Atlantic, however, with the US retail sales data for September and the University of Michigan's reading of consumer sentiment for October both due on Friday.
"With all the concerns about the strength or otherwise of the US consumer, there's no doubt that retail sales will be the key indicator for markets in the next week," said Peter Dixon, an economist at Commerzbank. "We're not going to see spectacularly strong retail sales numbers and markets will be sensitive to any downside," he said.
On the same day, US Producer Price Index data for September, a key inflation gauge, will also be closely watched. Strategists see the European relief rally of the last five days continuing after a week when large banks such as Citigroup , UBS and Credit Suisse calmed investors by detailing the degree of their injury from the credit crunch, and as markets still basked in the afterglow of a hefty US rate cut.
The DJ Stoxx European Banking sector rose by around 6 percent this week, its best weekly performance since late March. "People are just battered and bruised after a fairly volatile couple of months and any chance they have of taking a breather is very welcome the general sense is that the tension appears to be easing," said Commerzbank's Dixon.
The week brings a relatively quiet corporate calendar, with most of the focus falling on UK companies on Wednesday, when FTSE 100 companies Vedanta, Experian, Carphone Warehouse, Sainsbury and Cadbury Schweppes all release trading updates. Also on Wednesday, airlines Deutsche Lufthansa and Iberia release traffic figures.
Next week also sees second-quarter earnings results from German sugar producer Suedzucker and third-quarter sales results from French aerospace and telecoms equipment group Safran. Austrian builder Strabag's 1.3 billion euro IPO is due to kick off on Monday, with subscription running from October 8-18.
Investors may also focus on the US Federal Reserve releasing minutes from its September meeting on Tuesday, after last month spurring a relief rally in global stock markets by slashing interest rates by 50 basis points. "It'll be interesting to get some handle on what the Fed's thinking is on the current state of the economy," Dixon said.
At 1338 GMT on Friday, the pan-European FTSEurofirst 300 share index was up 0.7 percent at 1,583.78 points, heading for a fifth straight day of gains following the better-than-expected US non-farm payrolls data.
European shares are up nearly 7 percent this year despite tumbling 13 percent between mid-July and mid-August on fears that a crisis in the market for US subprime or risky mortgages would slow growth in the broader economy.
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