The twin themes of Iraq and the U.S. economy will continue to dominate investor attention this week. Data covering U.S. manufacturing, the service sector and employment will keep markets focused on the health of the U.S. economy, but any upside could be limited by continuing hawkish rhetoric on Iraq. Secretary of State Colin Powell is scheduled to appear before the United Nations Security Council on Wednesday to present the case for an early war against Iraq. Important data in Europe and Britain concerning manufacturing and service sector performance are expected as well.

It is central bank meeting time again, and once again neither the Reserve Bank of Australia, the European Central Bank nor the Bank of England are expected to change monetary policy. Interest rates for the three banks are 4.75 percent, 2.75 percent and 4.0 percent, respectively. Australia is dealing with a severe drought that has hurt exports. For the ECB, the euro's climb should dampen inflationary pressures, which would be welcome news. But high oil prices and the Iraq conflict are tempering the outlook for price stability. The Bank of England, with inflation above their 2.5 percent target for the past two months, is not expected to alter its policy.

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