Desperately seeking a catalyst to extend a rise from Friday's 11-week highs, markets this week will scour any clues from the Federal Reserve on whether the US central bank will maintain its recent pace of tightening.
A Fed hike this week is widely expected and also in focus are retailers, in a light week for company earnings, results from a clutch of US banks, more US pre-announcements and high oil prices, still stubbornly around $44 a barrel.
Some strategists see markets as poised to build on recent gains with a degree of confidence about earnings prospects and supportive valuations.
"There seems to be a fair amount of bad news already priced in the markets," said Andrew Killean, investment manager for European equities at Britannic Asset Management, which manages about 675 million pounds in European funds.
Britain's biggest supermarket chain Tesco, a stock market favourite, kicks off this week's earnings on Tuesday at the tailend of the European results season.
Tesco is set to report a robust rise in second quarter sales helped by its strategy of opening more convenience stores and analysts see it as a big beneficiary of consumers switching from rivals Morrison Supermarkets and J. Sainsbury.
On Wednesday, Spain's Inditex, owner of the trendy Zara fashion chain, is seen making strong progress in sales and margin growth when it unveils first-half results.
Retail aside, Royal Dutch/Shell Group will grab investor focus as the embattled oil giant attempts to put the damaging scandal of its overstated oil reserves behind it when it gives its annual strategy presentation on Wednesday.
Shell and its rivals BP and France's Total have all reported bumper profits, boosted by sky-high oil prices, but Shell's shares have vastly underperformed peers this year after it stunned investors in January by saying it had overbooked its oil and gas reserves by 20 percent.
European equities have risen 7 percent from 2004 lows set a month ago and are up 4 percent this year. The gains have come on the back of most companies reporting second-quarter results in line with market expectations.
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