Investors will wade into a stream of European company results next week to help judge if shares will continue to test six-year highs, while weighing economic data to tell if interest rates could pose a health risk to those levels.
The earnings season moves into higher gear with a clutch of sectoral bellwethers reporting results and investors will seek signs that underline the broadly held view among market participants that equities still have legs in 2007.
The FTSEurofirst 300 index of top European shares has gained 23 points so far this year and climbed to a six-year high of 1,521.92 points earlier this week. Volatile oil and metal prices are a concern and some of the technology companies reporting next week may underwhelm, but analysts see company fundamentals as strong.
"Technology may be weak - we're bearish on the sector - but overall we should see still decent numbers for the fourth quarter," said Edmund Shing, strategist at Kepler Equities in Paris.
"We're seeing weakness in the United States but they are more advanced in the economic cycle," he said. Dutch televisions-to-hospital-equipment maker Philips Electronics kicks off a busy week with results on Monday.
The world's top mobile handset maker Nokia, engineering giant Siemens, business software creator SAP and carmaker Fiat are all set to report results in the second half of the week.
Other key results and trading updates are from Swiss chemicals group Lonza, building material supplier St Gobain, industrial gases group Air Liquide, cosmetic maker L'Oreal, wines and spirits group Pernod Ricard and Swiss-based luxury goods maker Richemont. With the focus recently on metal prices, eyes will also be trained on trading statements from the world's biggest miner, BHP Billiton and platinum producer Lonmin.
Europe had a record year for mergers and acquisitions last year and the trend seems set to continue this year. Publisher Pearson, the subject of regular bid speculation, is due to issue a trading statement, while Swedish truck maker Scania, target of a bid from Germany's MAN, is due to post results.
Crude oil hit a 20-month low this week on unseasonally warm weather in the United States and a buildup of inventories. Any further weakness could impact oil stocks such as BP, Total, Royal Dutch Shell and Cairn Energy.
Investors will pore through the minutes of the Bank of England's last meeting, at which the central bank caused jaws to briefly drop with a rate rise one month ahead of a widely expected February tightening. Hawkish signals could spook investors on the FTSE 100, Britain's benchmark index, in which banking shares are heavily weighted.
"The BoE will clearly point to inflation skewed on the upside," said Kepler's Shing. Across the Atlantic, US housing data will provide hints as to whether the housing market - a weak spot in the economy - has bottomed out, and jobless data will give more clues about the pace of growth. French and German business sentiment indicators are also due and could underscore that Europe continues to boom this year.
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