Banks earnings, a European Central Bank rate decision and the outcome of the US elections will dominate European equity investors' attention this week. Bank results due include Dutch bank ABN Amro on Monday and Swiss investment bank UBS on Tuesday.
On Thursday market attention turns to the European Central Bank which is seen leaving rates a historic low of 2 percent and, on the same day, the Bank of England is seen keeping rates on hold at 4.75 percent after five rate hikes since November.
Drug makers will be a big focus as investors eye the outcome to the neck-and-neck US presidential election on Tuesday. A victory for Democratic Senator John Kerry is seen having a negative impact on the healthcare industry.
In the technology sector, Finnish mobile phone maker Nokia will be the main draw with investors set to grill the management on the weak product portfolio during the company's Capital Markets Day in New York on Thursday and Friday.
Europe's third-quarter results season so far has seen firms broadly shrugging off the impact of higher energy and raw materials costs and economic uncertainty, but investors are sticking with defensive plays rather than more economically sensitive sectors.
"I am beginning to sense that we could see a rally in equity markets towards the year-end as corporate news flow is very good, interest rates in UK have peaked and valuations are still very attractive," said Mike Lenhoff, chief strategist at private client money manager Brewin Dolphin.
By 1230 GMT, the FTSEurofirst 300 index of pan-European blue chips was flat at 1,000 points. It has gained some 4 percent so far this year, cramped by concerns of slowdown in corporate profits and economic uncertainty.
High oil prices, a rally in the euro and a fragile recovery in the export-led region mean that economists see a rate hike in the first quarter of next year at the earliest. Concerns over slower corporate profit growth and weak consumer demand are keeping market sentiment firmly in check.
"Recent client marketing across the continent has led to one key observation. There appears to be `no clear consensus for 2005' for either market direction or more significantly for the direction of profits," Khuram Chaudhry, European quantitative strategist at Merill Lynch said in a note.
BANKS IN SPOTLIGHT:
Analysts will focus on investment banking and brokerage business at the top banks which have been hit by declining trading fees in stocks and fixed-income securities due to lacklustre financial markets.
Swiss bank Credit Suisse and Europe's biggest insurer ING unveil their scorecards on Thursday along with French bank BNP Paribas. Germany's second largest bank, HVB Group, reports on the same day.
Elsewhere, metal and mining stocks are under close scrutiny after a surprise hike in interest rates in China on Thursday.
"Commodity prices have been a rising cost for corporates and so this is going to relieve some of the pressures - also on oil prices," said Lenhoff of Brewin Dolphin, which manages 14.5 billion pounds in investments.
Oil prices steadied on Friday after slumping by 8 percent due to the interest rate hike in China, but at $51 a barrel, prices are still 60 percent up on the year.