Concerns about the state of Europe's economy will run against the start of U.S. earnings season this week, which could lead to unpredictable movements in stock markets.

With sparse economic data on the schedule, traders will be looking for any signs of where the global economy is headed in the coming months, and that could lead to erratic shifts or a sudden downturn in market sentiment.

Canadian stock markets will be closed on Monday in observance of the Thanksgiving Day holiday.

"When you look at the market's performance year to date ... a lot of the news about improvement is already priced in," said Monika Skiba, senior portfolio manager at Manulife Asset Management.

"It's hard to imagine that we're going to have a replication of what happened (last week)."

Traders have been slowly building market confidence as better data emerged on the U.S. economy. On Friday, it was the unemployment rate, which fell below eight per cent for the first time since January 2009, while U.S. hiring increased to 114,000 jobs in September.

The report gave the U.S. markets another boost, with the Dow climbing to its highest closing level since December 2007. It was up 1.3 per cent for the week.

But the upcoming third-quarter earnings season is likely to put a stop to any exuberant climb higher. Earnings for July through September are expected to drop 1.3 per cent compared with a year earlier for S&P 500 companies, according to S&P Capital IQ, a research firm.

Analysts have been reining in their earnings predictions for weeks after economic bellwether FedEx said shipping volumes fell to pre-recession levels, and other major U.S. operators like railroad company Norfolk Southern slashed their forecasts.

Alcoa will be the first to unveil its results on Tuesday.

Further attention will be turned to Europe, where it's still anticipated that Spain could ask for financial help, though the country's president has downplayed those plans.

European markets have been lifted by the European Central Bank's move to buy bonds of troubled companies, though some have suggested it is merely applying bandages to a far more troubled economy.

"Specifically what you need to watch is the 10-year yield on the Spanish bonds," said John Stephenson, senior vice-president and portfolio manager at First Asset Funds Inc.

"You get it close to 6 1/2, marching towards seven per cent, and this is going to be a very ugly market because it means the situation in Europe is devolving."

Economic data in Canada is unlikely to offer any major surprises, though economists are keeping a close eye on any signs of a slowing domestic economy.

Canada Mortgage and Housing Corp. will report housing starts on Tuesday, and expectations are for a drop to 210,000 units, according to CIBC World Markets.

"While the low-rate environment continues to support homebuilding, already, secondary market activity has been decelerating for the last couple of months," it said.

Canada's trade performance for August is likely to ease off the record $2.3 billion deficit logged in July. CIBC said consensus expectations are for a $1.8 billion deficit.