Preview: European Shares Set to Rise, but Interest Rates Weigh

European equity markets were poised to rally higher next week as the interest-rate tightening cycles in Europe and Britain threatened to rain-in longer term gains.

"We still see the (equity) market going up," Patrik Schowitz, European equity strategist at HSBC, told, "as and when (European) interest rates go up, that may prove a stumbling block."

The European Central Bank looked set to keep interest rates on hold at its Thursday meeting, according to analysts polled by Reuters, following a 25 basis point raise in June.

Investors will be closely watching ECB President Jean-Claude Trichet's press conference after the announcement for clues on the future direction of rates. The conference will be broadcast live on at 1.30 pm London time.

"We still expect a rate hike in September," Philip Shaw, chief economist at Investec told, adding that Trichet may be more explicit in signalling a rise at Thursday's news conference due to the lack of an accompanying conference after the August decision.

And the Bank of England's overnight lending rate is expected to rise to 5.75% Thursday, according to 56 of 70 economist polled by Reuters. The hike would mark the fifth increase in a year of heightened inflation.

On the earnings front French department-store Hermes and Russian energy giant Gazprom will deliver results Monday and U.K. pub-chain operator Green King will report its fiscal full-year results Tuesday.

Initial public offerings are in vogue next week as Germany's Tognum attempts to raise 2 billion euros ($2.7 billion) on Monday with its share issuance and Switzerland's Newave Energy will list Thursday, potentially valuing the company at 134.4 million Swiss francs ($108 million).

Meanwhile, Siemens receives its new CEO Peter Loescher Monday to replace the outgoing Klaus Kleinfeld as head of the German conglomerate.

And in sports news, Friday sees the opening ceremony of the annual Tour De France cycle race in London.