Preview: European Stocks Eye Rate Decisions & Politics

"To sum up next week in one word: bumble," David Buik, marketing director at Cantor Index, told, adding that the strong gains seen in equity markets over the past weeks are likely to slow.

"We’ve come a long way and we can’t keep going north," said Buik, stating that "all of the markets are trading above the level of their own incompetence,” because of strong earnings and M&A froth.

Buik went on to say that once markets have seen rises in early May, they tend to be fairly flat in the middle two weeks of the month. "Don’t expect the same performance next week," he added.

Investors will get direction on the strength of the global economy next week as interest rate decisions are due from the European Central Bank, the Bank of England and the U.S.’s Federal Reserve Bank.

Interest Rate Decisions

The ECB is widely expected to keep rates on hold at 3.75% when the Governing Council meets next week, but the central bank’s President Jean-Claude Trichet could signal a rise in June to 4.0% when he holds his news conference. The decision is due at 1:45 pm CET on Thursday May 10 and will have live coverage of Trichet's presser at 2:30 pm CET.

The Bank of England's Monetary Policy Committee is expected by economists to raise interest rates to 5.5%, but the central bank has surprised before. The BOE will announce Thursday, at 1 pm CET.

There is unlikely to be any surprises from the Federal Open Market Committee with economists expecting no move from the current level of 5.25%. The decision will be released on Wednesday at 8.15 pm CET.

European Politics

Changes in the European political landscape will provide a backdrop to trading too as France welcomes a new president Monday and the U.K.’s Tony Blair is expected to announce the date of his resignation.

The latest opinion poll from French newspaper Le Monde suggests that conservative candidate Nicolas Sarkozy has a slim 6% lead over Socialist Segolene Royal, following a televised debate on Wednesday. The two presidential candidates must not campaign over the weekend, ahead of Sunday’s vote.

The U.K.’s ruling Labour party is reeling from local election losses that saw Scottish voters swing to the Scottish National Party, a left-of-centre party committed to Scottish Independence. The party also looks likely to lose control of the Welsh assembly.

The Labour Party leader Tony Blair is expected to formally announce his intention to resign next week under a timetable agreed with ruling National Executive Committee. The move would trigger a 7-week contest for his successor, which is expected to be won by the incumbent Chancellor of the Exchequer, Gordon Brown.

Earnings season will continue in Europe with the likes of Germany’s Adidas, Bayer and Deutsche Bank all reporting numbers, along with France’s BNP Paribas and Societe Generale.