European stocks will struggle to continue their recent rally next week if reports from the banking sector in particular show more signs of an economic slowdown. Shares dipped on Friday after rising for much of the week following news that Standard & Poor's cut General Motors and Ford debt ratings to junk status. Concerns over softening economic growth and oil still above $50 a barrel despite bullish US crude stocks figures also weighed on equities. "We have seen a good recovery this week but it is quite difficult to see what will move the market forward," said Hilary Cook, director of investment strategy at Barclays Stockbrokers.
An indication of the health of Europe's economy comes from the banking sector on Thursday when French bank BNP Paribas posts first-quarter numbers, and Spain's second-biggest bank BBVA has first-quarter figures out on Monday. Santander and several Italian banks are also due to report.
"We haven't seen the consolidation in the European banking sector we would like to see but they are good barometers of the health of the economy in their countries so let's hope we see a pick-up," Cook added.
In a busy week for airlines, British Airways posts full-year results on Friday with the airline tipping a 3.0 to 3.5 percent rise in revenues for the year to end March. Lufthansa reports first-quarter numbers with operating losses expected to have narrowed 19 percent as the German carrier continues to lower costs, analysts said.
"It really comes down to guidance statements for each of them," Penny Butcher, airlines analyst at Morgan Stanley said.
"With British airlines the results could be a positive share price event but in Europe any major share reaction will stay neutral to slightly down."
Traffic data for April is also available from a number of carriers including Easyjet and Lufthansa to follow strong figures from Ryanair and flat numbers from BA this week. Milan sees oil and gas group ENI posting first-quarter numbers and Fiat's continued troubles will come under the microscope on Tuesday when it releases first-quarter figures.
Sanofi-Aventis first-quarter results are due on Friday while the American Society of Clinical Oncology (ASCO) conference starts the same day in Orlando.
On the political and economic fronts, Britain settles into a fully expected third term of a Labour government and awaits Monday's Bank of England interest rate decision. Economists expected no change in rates.
"There has been further evidence of consumer retrenchment while the global economy has entered another soft patch," Philip Shaw, chief economist at Investec, said in a note.
"Accordingly we see base rates on hold at 4.75 percent this time, with just a 25 percent risk of a hike.
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