Analysis By Myles Neligan BBC News Online business reporter

Investors will be watching out for Safeway news

Supermarket group Safeway could provide a rare spark of interest for British investors this week amid a dearth of major economic news.

Trade and Industry Secretary Patricia Hewitt is thought likely to announce on Thursday or Friday which of four rival retailers will be allowed to bid for the company, which has been up for sale since January.

Ms Hewitt is widely expected to give the green light only to the UK's fifth-ranked grocer, William Morrison, blocking bids from its bigger rivals Tesco, Asda and J Sainsbury on competition grounds.

Gaining regulatory clearance would be a boost for Morrison, which last Thursday cheered the City with better than expected first-half sales and profits.

But there remains an outside chance that Asda may pip Morrison to the post, while retail entrepreneur Philip Green - who was exempt from the competition enquiry - may yet weigh in with a bid of his own.

Look west

Aside from the Safeway takeover battle, investors will be looking as usual to Wall Street for fresh leads.

The UK's FTSE 100 share index closed 1.3% lower on Friday, but it is still up more than 3% since the beginning of the month thanks in part to a strong performance from the US stock market.

The FTSE lacks the confidence to break 4,300 until it has some solid economic reason Alpesh Patel

The Dow Jones index of leading US shares hit a 15-month high on Thursday last week, lifted by positive jobs figures which reinforced hopes that the world's biggest economy is on the mend after three years of sluggish growth.

Analysts expect the market to continue trending upwards in the medium term, provided there is no economic setback.

"It's much more 'steady as she goes' compared with earlier this year," said Hilary Cook, director of investment strategy at Barclays Private Clients.

"There has been a big reduction in volatility. Our client base is much more confident."

However, some traders and analysts believe that share prices are unlikely to post further strong gains unless there is a steady flow of positive economic news.

"The upward glide seems the most likely scenario, but the FTSE lacks the confidence to break 4,300 until it has some solid economic reason," said private investor Alpesh Patel.

The FTSE breached the 4,300 level briefly last week, only to fall back again.

Data round-up

In a thin week for economic news, investors will be hoping for fresh insights into the health of the US economy on Friday when final growth estimates for the April to June quarter are released.

Any downwards revision from the initial estimate of 2.4% will be interpreted as a negative signal.

Also on Friday, the markets will be paying close attention to US consumer sentiment figures and weekly unemployment claims.

On Thursday, investors will get an update on Germany's economic prospects when the respected Ifo institute publishes its monthly snapshot of German business confidence for September.

While the German economy continues to underperform, the Ifo index has risen for the last four months in a row, fuelling hopes that a turnaround may be on the way there too.

"The hope must be that Europe and Japan, which have been such laggards, will start to pick up," said Barclays' Hilary Cook.