Outlook: European Stocks Seen Rising on M&A, Strong Earnings

Major stock markets in Europe look set to hold on to their current strong levels as earning season continues and high-profile mergers and acquisitions dominate investor sentiment.

“The market is under-pinned by M&A activity and good quality earnings,” David Buik, marketing director at Cantor Index, told CNBC.com.

But there is a chance the market may pull back when the major banks report their earnings the week after next, because many analysts will be worried about bad-debt provision, Buik added.

Next week’s earnings include the likes of Air France-KLM, DaimlerChrysler, Euronext and BNP Paribas, among many others.

Markets will also be deciphering the weekend’s events from the Group of Seven Countries meeting in Germany. The yen fell against the dollar in the run-up to the meeting as U.S. Treasury Secretary Henry Paulson suggested he wouldn’t put pressure on the Bank of Japan to let the currency appreciate.

Even though the yen may not be on the official G7 agenda, currency traders will be closely watching the event for comments on its future direction.

Oil will also be in focus as OPEC releases its monthly oil market report on Thursday, Feb. 15 and cold weather in the U.S. adds upward pressure to the commodity which hovered near $60 dollars a barrel at the end of the week.

Markets will also get a take on the performance of the German economy as the ZEW Index is released on Tuesday, Feb. 13. The forecast of analysts polled by Reuters for ZEW economic sentiment is 5.0 for February, up from -3.6 for the previous month. The ZEW current condition is forecast at 67.8 for February, down from 70.6 prior.

The latest arm of Richard Branson’s empire launches Wednesday, Feb. 14, as a merger between NTL, Telewest and Virgin Mobile creates Virgin Media.

And the annual 3GSM conference will hit Barcelona Tuesday Feb. 13, which looks at the mobile phone industry and all its multimedia possibilities.

Among U.S. events likely to affect European trading, there are a batch of economic numbers out on Friday, Feb. 16, including the January producer price index (PPI), and the latest data on housing starts and consumer sentiment.