Analysis By Myles Neligan BBC News Online business reporter

Investors need more reassurance

The benchmark FTSE 100 share index closed lower for the fourth consecutive session on Friday, settling down 0.46% at 4,237.8.

"We have had a good run in the third quarter due to hopes of a cyclical recovery," said Jeremy Batstone, head of investment strategy at the Fyshe Group.

"But we now need further confirmation of that recovery."

In corporate news, the week will be dominated by retailers, with the UK's biggest supermarket group, Tesco, due to report first-half results on Tuesday, and smaller rival Morrison to follow suit on Thursday.

Analysts expect both companies to turn in solid growth in profits and sales, helped by warm summer weather.

KEY NEWS EVENTS THIS WEEK US interest-rate decision (Tues) UK inflation (Tues) Tesco results (Tues) Bank of England minutes (Weds) Kingfisher results (Weds) Next results (Thurs) Morrison Supermarkets results (Thurs)

City forecasters have pencilled in a 15% rise in pre-tax profits to �625m for Tesco, while press reports over the weekend suggested that Morrison could report pre-tax profits of �130m, also up by 15% from this time last year.

Both sets of results are likely to be overshadowed by renewed speculation over the outcome of the Safeway takeover battle.

The two firms are among four supermarket groups waiting to hear from competition authorities whether they will be allowed to bid for Safeway, which put itself up for sale in January this year.

Other retailers due to report this week include DIY specialist Kingfisher and High Street clothing chain Next.

US rebound?

In a busy week for economic news, investors will be focusing in particular on the US Federal Reserve's interest rate decision for September, to be announced on Tuesday.

If you get further data showing some kind of growth revival... it means that people are reinforced in their expectations of what equity markets can deliver in the coming years Nigel Richardson AXA Investment Management

The Fed is expected to leave rates on hold at 1%, but the markets will be scrutinising its accompanying statement for clues as to how the US central bank sees the economy evolving in the months ahead.

Recent US growth figures have been encouraging, but unemployment remains stubbornly high and consumer sentiment - a key indicator in a country where consumer spending accounts for two-thirds of all economic activity - is shaky.

"If you get further data showing some kind of growth revival... it means that people are reinforced in their expectations of what equity markets can deliver in the coming years," said Nigel Richardson, an equity strategist at AXA Investment Management.

Preliminary clues as to the strength of the US recovery will come on Monday, when official estimates of US industrial production and capacity utilisation in August are released.

Rate intentions

Investors will also be poring over the minutes of the September meeting of the Bank of England's rate-setting Monetary Policy Committee (MPC), due out on Wednesday.

Here, they will be searching for any signs of an increase in support for raising interest rates among the committee's members.

All nine MPC members voted to keep rates on hold at 3.5% in August, but some of them may have shifted in favour of a rise in the light of subsequent data showing stronger than expected expansion in the services sector.

Any significant increase in support for raising rates will tend to reinforce forecasts by some City analysts that borrowing costs could start to rise as soon as the end of this year.

Also on Tuesday, the markets will be watching out for UK inflation figures for August, revised Japanese industrial production data for July, and a closely-watched gauge of German economic prospects compiled by the ZEW institute.

The UK's annual rate of underlying inflation is expected to come in unchanged from July at 2.9%, while investors will be hoping for upbeat Japanese data following tentative signs the country is emerging from a protracted downturn.

Last week, official data showed that the Japanese economy grew by a better than expected 1% in the three months to June, helped by strong exports.