The gains are likely to send the FT-SE 100 Index back into record territory - provided earnings from National Westminster Bank, EMI Group, Standard Chartered, Prudential, Abbey National and British Aerospace don't disappoint.
"The market will really focus on the financial results," said Job Curtis, a fund manager at Henderson Investment Management. "If they come out with reasonable results, it could be quite positive."
Exporters, whose goods become less competitive when the pound is strong, should be boosted by the currency's recent weakening. Sterling closed on Friday little changed against the dollar but comfortably below the highs seen two weeks ago.
UK drug shares could also rise this week as the US Food and Drug Administration's Cardiovascular and Renal Drugs Advisory Committee meets to review new heart drugs, including SmithKline Beecham's Coreg, a treatment for patients suffering from congestive heart failure.
The weaker pound probably won't help oil companies like British Petroleum and Shell. Crude oil prices fell to a six-month low on Friday.
It will also be a heavy earnings week in Paris, with drug company Sanofi, oil giant Elf Aquitaine, financial services group Paribas and electrical accessories maker Legrand all reporting 1996 results. Low interest rates should support the market.
In Frankfurt, shares of automakers, chemical companies and other exporters could rise this week lifted by the dollar's strength against the mark. Comments from a Bundesbank official suggesting Germany may not meet the criteria to participate in the single currency could be good news for bonds and financial shares.
In Tokyo, Japanese stocks could extend last week's gains amid optimism that the country's banks will get government help to clean up their bad debt.
In New York a Goldman, Sachs report predicted that the Standard & Poor's 500 Index may rise to 850, almost 6 per cent higher than Friday's closing price, by March next year. Copyright: IOS & BloombergReuse content