European stocks are set for a cautious week ahead as jittery investors wait to see whether markets will claw back from their recent steep losses or threaten to tumble further.
A hefty batch of earnings from corporates including Lagardere, Gaz de France and Antofagasta will be in the spotlight, alongside Germany's ZEW index and US inflation data as investors scour for direction.
"We're positive until the end of the year, but it could be bumpy in the next days or weeks. I'm not quite convinced we're going to see a second downside wave," said Philipp Musil, fund manager at Constantia Privatbank in Vienna. "We bought some puts for downside protection and we have the sky open for the upside."
The FTSEurofirst 300 index of leading European shares was on track to end Friday's session down around 0.5 percent, but up 1 percent for the week. The European index is around 4.6 percent below levels seen before last week's equity slide, sparked by a Chinese stocks sell-off, worries about the strength of the yen and the global economic outlook.
"Fundamentals remain strong, and while near-term visibility is limited, so, we think, is the scope for further downside," said ABN Amro analyst Ian Richards in a report. "Valuations still offer appeal, the earnings outlook is robust, and most importantly, under-geared corporate balance sheets point to sustained releveraging catalysts, including M&A over coming months."
Investors will be paying close attention to next week's corporate earnings and economic data as they search for reasons to push the European market back to the six-year highs seen in before the late February sell-off.
Germany's closely watched ZEW investors sentiment survey on Tuesday dominates the European economic agenda, along with Euro zone inflation figures on Thursday. US data next week includes February's Federal budget on Monday, retail sales on Tuesday and quarterly current account figures on Wednesday.
On Thursday, investors will scrutinise US producer price data, ahead of consumer price inflation, industrial production and the University of Michigan survey on Friday. A swathe of corporate earnings will also be used to help glean a sense of direction.
"Corporate earnings are quite stable, they support the market on the European side so there shouldn't be a problem," said Musil. Lagardere, Linde, Pirelli, Bovis and Corus report on Monday, while Continental releases its annual report. Gaz de France, Antofagasta, Mediaset, Seat Pagine and Euronext report on Tuesday, while Wednesday sees earnings from JCDecaux, AMB Generali, AMEC, Legal and General and Informa.
A deluge of earnings on Thursday includes results from Clarins, Casino Guichard, Altana, Kazakhmys, Sonaecom, Vontobel , Aegis, WM Morrison, Delhaize and Bayer. Britain's Prudential is also expected to announce a major review on Thursday when it delivers its earnings. ASM Brescia, Banca Italease, Piaggio and Telegraaf Media report on Friday, with a trading update from Debenhams.
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