Investors waiting to see if European shares can eke out a gain this year will scour economic data and watch banks for fresh credit market disclosures next week as earnings news slows.
Oil flirting with $100 and the euro at new highs against the dollar are also likely to be top themes, adding to inflationary pressures and making life tougher for European exporters.
The pan-European FTSEurofirst 300, a key sectoral share benchmark, is down 1.1 percent this year compared to a near-15 percent gain at this point in 2006, punctured by a seizure in credit markets in August. The index has had a torrid November, losing around 8 percent to put it on track for its worst month since December 2002.
Analysts say the main triggers for any recovery could be further rate cuts in the United States, where the Federal Reserve has slashed its main funds rate by 75 basis points in the last two months. Data due next week could reinforce current market expectations for more easing from the Fed.
US monthly home sales and weekly mortgage figures are due on Wednesday, a second read of quarterly GDP data and new home sales on Thursday, as well as core personal spending and Chicago PMI on Friday. Analysts said that while the figures were key, markets seemed to have gone too far in discounting bad news and there could be a rebound.
"There's going to be a very strong focus on the data, more than at many points in the past, especially with regard to possible central bank easing," said Deutsche Bank strategist Bernd Meyer. "We judge that the equity market is pricing in at least a 50 percent probability of recession now, and is getting a little bit ahead of itself," he said.
"By our calculations, banks have priced in book value destruction in Europe alone that is about the level of total estimated subprime losses including not just cash subprime but derivatives," he added.
In Europe, investors will focus on the German Ifo index of business sentiment and German inflation data on Tuesday. Euro zone money supply data is due on Wednesday. Thursday brings British mortgage data and Friday euro zone GDP figures. On the corporate front, it is a relatively light week after a flurry of numbers from European heavyweights over the past month.
Prominent companies providing updates are French wines and spirits group Remy Cointreau, caterer Compass Group, specialist electrical good retailer DSG International and Danish shipping and oil group Maersk. Other big names on the list are platinum specialist Johnson Matthey, software firm Sage Group and miner Antofagasta. Italian Power Company Edison presents its 2008-13 industrial plan.
Bid target Rio Tinto is expected to focus on its prospects as an independent firm rather than revealing defence tactics as it gives its first detailed response on Monday to a take-over proposal from rival miner BHP Billiton. But the focus will be on financials, a sector that has been worst battered by the credit crunch.
British bank Barclays provides a trading update on Tuesday. It said earlier this month that its investment bank unit made a 1.3 billion pound ($2.7 billion) writedown due to its exposure to credit market problems in the four months to the end of October.
Banks across the world have announced more than $50 billion of writedowns and losses linked to subprime mortgage loans, leveraged loan commitments and other assets since September. Anglo Irish Bank and mortgage lender Bradford & Bingley, whose shares have tumbled more than 40 percent this year, report on Wednesday and Thursday.
Germany's IKB, a lender that nearly collapsed under subprime losses earlier this year, updates on Friday. The DJ Stoxx European banking sector index has lost nearly 20 percent this year, weighed down by widespread uncertainty over banks' exposure to a crisis in subprime markets and credit market ructions that followed.
"Sentiment on financials is not going to change dramatically in the short term," said Meyer. "A massive rebound will be hard. But on a 6-month perspective, whatever scenario I think of, I think financials will be among the outperformers.