Europe's Crisis to Overshadow U.S. Data in Coming Week

NEW YORK (TheStreet) -- U.S. investors will return from the Thanksgiving holiday weekend to face continued uncertainty over Europe's debt crisis.

Because investors worry the worsening crisis could drag down the world economy, headlines from Europe next week are likely to overshadow a raft of economic data slated for release in the U.S., including the monthly government employment report.

Since spiraling into chaos in the early summer months, Europe's debt crisis has confounded policymakers' attempts at containment.

As Americans were gorging on deep-fried turkey and stuffing on Thursday, European officials from Italy, Germany and France were busy shooting down proposals that might have helped put the eurozone on the path toward fiscal stability.

Among the rejected proposals was the creation of eurozone bonds. Meanwhile, European Central Bank policymaker Jose Manuel Gonzalez-Paramo said eurozone nations should not rely on the central bank to resolve the debt crisis, confounding observers who contend more ECB action is needed.

By Friday, Italy was forced to pay record interest rates at a government bond auction in order to raise a planned 10 billion euros. Italian 10-year bond yields rose to 7.32%, considered too high to be sustainable. Economists are doubtful that Italy, which faces a debt pile equal to 120% of its gross domestic product, will be able to escape trouble purely through fiscal austerity measures.

Pessimism surrounding Europe's debt dilemma remains persistent, with analysts anticipating a worsening of conditions next week. A report from Barclays Capital on Friday predicted Europe would slip into a recession in the fourth quarter as Italy and Spain were forced to seek financial aid from outside sources to prevent a collapse.

"This [aid] is unlikely to be the big 'bazooka' the market is hoping for," said the report. "Ultimately, whether a solution is reached largely depends on developing a more coherent vision of the post-crisis landscape."

> > Bull or Bear? Vote in Our Poll

Investors will get a new round of domestic economic data to parse in the coming week to weigh against Europe's intractable debt woes. Estimates on everything from housing to manufacturing activity and employment indicate that investors should expect more of the middling economic performance they've seen in recent months.