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Investors, Mostly Distracted, May Focus on Fallout of Telecom Italia Takeover

In a week with another market-closing holiday, there are some issues that are likely to keep things interesting.
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Aside from the fallout surrounding


successful hostile takeover of

Telecom Italia


, Europe is facing not only another market-closing holiday but also the possible beginning of the summer doldrums.

Sure, we just celebrated Ascension, but this time it's Whit Monday, which together with Whit Sunday commemorates the descent of the Holy Ghost on the day of Pentecost. The "whit" comes from white, which was the preferred color of clothing for the many baptisms held on the holiday.

But besides the chance for a sartorial history lesson and a three-day weekend jaunt to the Ardennes or the North Sea, Whit Monday could signal the beginning of the summer slowdown: In looking at the equity markets on Friday, investors could be forgiven for thinking we were deep into July.

European stock markets closed last week mixed and, at best, apathetic. Volumes were low, and trade was described throughout the day as "dragging" and "sleepy." And all this two months before the entire Continent closes up shop for August and heads for the beaches and mountains.

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Some issues are sure to shake the growing lethargy from investors when they come back to work on Tuesday, however.

Deutsche Telekom

(DT) - Get Dynatrace Inc. Report

, which had hoped to merge with Telecom Italia and is now left with a gaping hole in its international strategy, could certainly draw investor's attention.

Aside from the telecom sector, there's always the strange happenings in fixed income to keep one occupied. Eyes will remain trained on the spread between German bunds and U.S. Treasuries -- to see if long-term European interest rates will continue to follow U.S. yields higher, despite economic fundamentals that would argue for a further widening of the spread.

Tamarind Fowler, a London-based fixed-income analyst for

Stone and McCarthy Research Associates

, says one reason Bunds may be following U.S. Treasuries is that there are many more U.S. investors holding bunds than there are Europeans holding Treasuries.

"But that should not preclude spreads from widening further, and the Euroland bond market from decoupling altogether from Treasuries in a situation where fundamentals, price outlook and the monetary-policy stance on both sides of the Atlantic are so far apart," Fowler says.

Besides debt spreads, trans-Atlantic mindsets may also begin to drift apart in the coming week, as America bustles ahead. Europe, meanwhile, will be getting out those white linen suits, breaking out the Pimm's and pastis and and getting ready for that slower summertime pace.