European stocks may stage a relief rally next week, with financials leading the way higher, as investors welcome positive action from the troubled banks, analysts told CNBC.com.
“It may not be the start of a bull market, but it’s at least a bear-market rally,” Andreas Wex, global equity strategist at Dresdner Bank, said Friday adding that the equity gains will likely be peppered with risky volatility.
Since the subprime debacle erupted last summer, financial stocks have been labeled toxic and sold remorselessly, but after a flurry of writedowns and recapitalizations, investors could be regaining confidence.
“The level of uncertainty should ease, which will bring equity prices up in the coming weeks,” Wex said, pointing out that traditional defensive sectors such as health care should be avoided because investors might rotate into more bullish stocks.
Concerns over the strength of the European economies are set to linger, so investors are likely to pay close attention to a batch of retail sales figures from the likes of food and drinks group Nestle, auto-maker Renault and luxury goods retailer PPR.
Corporate earnings will also be in sharp focus with pharmaceuticals GlaxoSmithKline and Astrazeneca and utility company Iberdrola all reporting first-quarter results.
Investors should also get more details on the troubled UK real-estate sector as Rightmove releases its monthly house-price index for April and Nationwide gives its monthly housing review.
Minutes from the Bank of England’s April meeting will also be released, giving an insight into the Monetary Policy Committee’s interest-rate strategy.
Meanwhile, energy ministers will be gathering at the International Energy Forum in Rome to discuss the booming commodity sector.