A flood of results will set the direction for European stock markets next week as the earnings parade gets into full swing, with figures so far painting a mixed picture of corporate profitability. About 30 percent of companies in the DJ Stoxx European index unveil results, with the big focus on earnings from oil firms, drugmakers, telecoms and automakers.
Markets will also eye leading business surveys due in the region, with the Ifo research institute's closely watched German business sentiment index out on Wednesday, while advance estimates of US Q2 GDP are unveiled on Friday.
The pan-European FTSEurofirst 300 index of leading shares was down 0.8 percent at 1,292 by 1115 GMT on Friday, but set to end the week about 1 percent higher.
"I think companies will probably find it hard to hit the upper end of where analysts are pegging numbers," said Andrew Lynch, a fund manager at Schroders.
"Nevertheless, the underlying growth rate in a lot of sectors is still going to be very good. The earnings season itself is going to be quite choppy," said Lynch, who is part of a team handling $10 billion in European equities at Schroders.
US results have come in mixed, with Dell warning on Friday that its results would come below market forecasts, while heavy equipment maker Caterpillar raised its outlook for the year.
INTEREST RATES BOOST Markets were boosted this week by Federal Reserve Chairman Ben Bernanke's expectations that core US inflation would fall. That sent the strongest signal yet that the Fed's two-year-old cycle of raising interest rates could come to an end soon.
Money managers believe Bernanke's comments highlight inflationary pressures are no longer seen the main risk for the US economy by the Fed and it has set signs on slower growth, particularly from the housing sector.
Richard Duncan, head of investment strategy at ABN Amro Asset Management said these remarks made clear that the Fed recognised the US economy had begun to slow and suggested the end of the tightening cycle may be near.
"The dilemma confronting the Fed, however, is whether the economy is slowing quickly enough and significantly enough to prevent inflation from accelerating during the months ahead. "In the near term, slowing growth combined with inflation worries are likely to keep investors nervous and markets volatile," he said.
The pan-European FTSEurofirst index has fallen 8 percent from a take-over-fuelled, near five-year high struck in May, but is up about 1 percent so far this year.
"I have been surprised the correction has been as sharp and steep," said Lynch, citing political problems in the Middle East and oil prices, which hit $78.4 a barrel last Friday.
"People are now continuing to ask the question: 'how long will the world remain resilient to oil prices'. We are very much navigating in uncharted territory."
FLOOD OF EARNINGS Fiat kicks off with first half results on Monday, along with key performance indicators from Vodafone. Oil results will be eyed as analysts watch out for comments about the impact of strong product prices on earnings.
BP reports earnings on Tuesday, while numbers from BG Group are due the following day and Royal Dutch Shell and Spain's Repsol unveil earnings on Thursday.
In the UK, drugmakers GlaxoSmithkline and AstraZeneca report quarterly results on Wednesday and Thursday and focus will be on whether the companies will raise their full-year outlooks. Reuters, Peugeot and Spanish bank BBVA announce results on Wednesday.
The week's earnings peak on Thursday, with numbers due from France Telecom Telefonica, automakers Renault, DaimlerChrysler and Volkswagen, Arcelor and EADS.
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