Earnings from leading companies such as HSBC and Sanofi-Aventis, a euro zone interest rate decision and US jobs data hold the key next week to whether European shares can revisit the highs set in May.
Financials will feature high in a crowded results diary, with Deutsche Bank and BNP Paribas among the top names due to report, while many chemical, mining and energy groups are also due to post earnings. Developments in Lebanon, and their impact on oil prices, will dictate sentiment as diplomatic divisions appeared to widen over how to end the 17-day old conflict.
Concern that violence will spread to the rest of the Middle East, which pumps a third of the world's crude, continues to hang over markets as oil prices stay around $75 a barrel.
"Equities remain under various threats - the oil price, interest rates, and foreign exchange - so it's keeping the market under pressure," said Romain Boscher, head of equity strategy at Groupama Asset Management. "The real key in this fragile market is corporate earnings. These have been generally correct so far, even if they showed a greater disparity than we had seen before," he said.
The FTSEurofirst 300 index was down 0.2 percent at 1,333.21 points by midsession on Friday, a level last seen in the middle of May but still 5.4 percent away from a near five-year peak of 1,407.52 set at the start of May.
HSBC and ABN Amro kick off a busy reporting week for European banks, with results on Monday, followed by updates from Deutsche Bank and HBOS on Tuesday, BNP Paribas, Credit Suisse Group and Lloyds TSB Group on Wednesday. Societe Generale and Barclays are due to post quarterly numbers on Thursday, while Royal Bank of Scotland will close the week on Friday.
"Banks exposed to capital market activity continue to perform strongly, but we believe the current levels of profitability are unsustainable," said ABN Amro strategist Rolf Elgeti, predicting a tougher environment for euro zone banks.
"The performance of the European banking sector has historically proved to be strongly correlated to money market expectations of ECB rate moves. Yet over recent months the sector has continued to outperform, despite the market moving to price in further tightening.
"This suggests rate hikes may yet drag on the performance of the banks and are not in the price," Elgeti added. Still among financials, Axa, AGF and Muenchener Rueckversich report on Thursday, followed by CNP Assurances and Swiss Re on Friday.
Other top corporate names due to report include utility group Suez, drugs and chemicals group Bayer and miner Antofagasta on Tuesday.
Food giant Danone, cement maker Lafarge, Sanofi-Aventis, chemicals group BASF and Clariant, car maker BMW, Mittal Steel, sweets and soft drinks group Cadbury Schweppes and miner Xstrata all report on Wednesday. Thursday will see numbers from Total, Rio Tinto and consumer products group Unilever, while Anglo American and EDF are on Friday.
Beyond earnings, investors will scour the European Central Bank's post-interest-rate-meeting statement for clues on how many more rises are in the cards. The central bank is widely expected to tighten credit costs further on Thursday.
The Bank of England also announces a rate decision on Thursday but a sizeable majority of economists polled by Reuters expects the central bank to keep rates on hold this time.
All-important US employment data will hog the limelight on Friday as investors look for clues on the health of the world's biggest economy. Economists expect 150,000 jobs to have been created, although several market observers said this would not, on its own, be enough to underpin the market. "We don't believe in a rosy scenario as the market remains caught between inflationary pressures and interest rates, which in the United States are already high enough to create a sharp slowdown in the economy," Groupama's Boscher said.
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