The Coming Week in Europe: German Business Confidence Could Boost Euro

Signs of economic strength in Europe are trickling in. The market will also be watching for French trade data and Italian consumer prices.
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While much of Europe will be at the beach making the difficult choice between sun block and cocoa butter next week, unlucky economists won't have time to get a tan.

With plenty of economic data out in the coming week, the closest economists will come to sunning themselves will be the halogen lamps in their offices. Among the important releases is Thursday's business confidence report for July from the Munich-based

Ifo

economic institute.

That report will likely show the continent's largest economy, Germany, is hard at work, even if its vacationing population isn't. The report is also expected to show German companies feel better about themselves for the second month in a row.

In June, rebounding German business confidence helped the euro narrowly avoid parity with the U.S. dollar. It also convinced foreign exchange traders to give more credence to the stronger economic data from other parts of Europe that followed.

Since Germany accounts for about a third of the entire euro zone economy, robust figures for business sentiment would naturally set the stage for the euro to gain even more ground against the dollar. In Friday trade, the euro was worth $1.056.

Ironically, the euro's weakness, in part, helped boost German business confidence, as it made exporters' goods cheaper abroad. July's reading should show a continuation of that trend.

"June's surge was not a flash in the pan," says

PaineWebber International

senior economist Alison Cottrell. That isn't to say the reviving German economy will immediately cause alarm bells to ring at the

European Central Bank's

tower in Frankfurt. The ECB looks set to keep interest rates on hold until at least 2000, she says.

Other data expected in the coming week include figures for the French trade balance in June and Italian consumer prices for July, both to be released Thursday morning. The French trade surplus will likely widen to more than $1 billion and Italian prices should rise 0.3% vs. the previous month.

Stock traders also will have data to look at and that will direct them to financial stocks. On Monday,

Dresdner Bank

(DRSDY)

will release half-year earnings, as will Dutch giant

ABN Amro

(AAN) - Get Report

on Thursday.

On Friday, German airline

Lufthansa

(DLAGY)

will detail its results.

No sun block manufacturers are on the earnings schedule. They're probably at the beach.