European stock markets already at five-year highs could get a new fillip from tame oil prices and ongoing take-over buzz next week, but economic data and comments by central bankers will ultimately drive sentiment.
Updates by media and broadcasting group Thomson, car parts maker Faurecia, aero engine and telecoms group Safran, and retailers Laurus and Carphone Warehouse head a thin earnings agenda.
This leaves the corporate focus on a flurry of acquisition stories which have shaken sectors such as utilities, steel, banks and airlines in recent weeks, and is largely behind a rise in Europe's top stock indices to highs last seen in June 2001.
"Mergers and acquisitions, leveraged buyouts, and capital returns continue to be a key support of our bull case on European equities. Private equity and corporate buyers are unlikely to stop buying equities unless there is a sharp profits collapse, interest rates shift aggressively higher, narrow corporate bond spreads snap higher or there is a sharp re-rating of equities," Citigroup analysts said in a note.
In the absence of such negative scenarios, Citigroup said it expected more such take-overs and leveraged buyouts over the next 12 to 18 months across Europe.
By 1300 GMT, the FTSEurofirst 300 index of top European shares was up 0.1 percent at 1,410.82 points, standing right below a multi-year peak of 1,413.61 points and showing a 10 percent gain since the start of the year. Concerns about slowing US growth have fuelled bouts of equity sell-off in recent weeks, although some strategists argue that a soft, rather than a sharp, landing of the world's biggest economy is a scenario investors can live with, and even prosper from, as this would lead to US interest rate cuts next year.
"By the summer of 2007, signs of weakness in data will likely prompt the Fed(eral Reserve) to ease monetary policy," said Alain Bokobza, chief strategist at Societe Generale.
"We would describe this as fine-tuning cuts rather than the start of another cycle of rate movements," Bokobza said, adding the cuts will boost equities in general, and consumer staples and pharmaceuticals in particular. Investors who are adopting a defensive equity portfolio allocation will miss out on a global economic growth forecast at 4.1 percent in 2007, and profit rises which are expected to come in line with expectations, Bokobza said. Next week's batch of US economic data - including wholesale inventories on Tuesday, the Beige Book on Thursday, and retail sales, business inventories and the University of Michigan consumer confidence reading on Friday - will be scoured for fresh clues on the health of the US economy. On Friday, data showed that US employers had added just 51,000 jobs in September, far below the 125,000 forecast by analysts, but investors found relief in a sharp upward revision in August numbers to 188,000, from a previous figure of 128,000.
Monetary policy will stay in focus next week. Investors are on the lookout for any more hawkish comments from European Central Bank President Jean-Claude Trichet, while Wednesday's publication of the Fed's last rate-setting meeting, and speeches from the heads of the Richmond and Chicago Feds will give some insight in upcoming US monetary steps.
The Bank of Japan is due to announce a rate decision on Friday, with financial markets looking for clues on when Tokyo will next raise rock-bottom borrowing costs, which have helped prop up the yen against the euro.
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