Uncertainty over as possible U.S.-led attack on Iraq and terrorist warnings in the United States are likely to dominate market attention this week, with not much notable economic data on the schedule anyway.

This week will bring the UN weapons inspectors’ final report to the Security Council on Friday. “Not a happy note,” says BMO Nesbitt Burns.

TD Bank confirms that financial markets have shifted their focus to Friday’s weapons inspectors report. “The Security Council remains deeply divided over Iraq. The U.S. is clearly determined to move forward –– and received a strong message of support from the U.K this week — but the rest of the Council continues to urge more inspections. Next Friday’s report will be critical in resolving this conflict, either by giving the latter group the evidence they need to adopt a second resolution approving military action, or by prompting Washington to act independently –- all of which suggests that financial markets are poised for another week of volatility.”

RBC Financial concedes that geopolitical events will likely take centre stage once again this week, but it also says that there are some important data releases to consider, particularly in the U.S.

It notes that the Canadian data calendar is light, with January housing starts and the January Purchasing Managers’ Index out on Monday, and December auto sales out on Thursday.

The U.S. data calendar heats up late in the week, RBC says, with January retail sales and initial unemployment claims out Thursday and December business inventories, January industrial production and preliminary February consumer sentiment out on Friday.

CIBC World Markets says that in Canada, “it will be a week largely devoid of market-moving data or direct monetary policy developments. Monday’s housing starts report — the sole release worth watching — is likely to reveal a residential home market that is still sizzling. But after a banner 2002, growth will be harder to come by this year.” It says that the housing sector strength remains vulnerable to higher rates, which are expected soon.

BMO Nesbitt Burns says that it looks for activity to dip slightly the 200,000 level in January, as the weather was much harsher in most of Canada than has been the case in recent Januarys.

In the U.S., Federal Reserve Board chairman Alan Greenspan will be testifying before Congress on Tuesday and Wednesday. But he will undoubtedly be competing with the Iraq situation for the market’s attention. Still CIBC says that, “Markets will be particularly interested in what the Fed chairman has to say about the economy’s prospects, looking beyond the Iraqi situation, and any hints of more fundamental weakness could lead investors to upgrade the likelihood of further rate cuts.”

Later in the week the data starts to flow, and CIBC says that higher gas prices means core retail sales could marginally top expectations. Factory production released Friday, should reclaim December’s losses, it says.

There will be plenty of earnings reports this week, too, including several from insurers. Fording reports on Monday, along with Groupe Laperriere & Verreault Inc., Ipsco, Kingsway Financial, Noranda and TVA Group.

Fortis Inc., George Weston Ltd., Industrial-Alliance, Intrawest, Perot Systems and Shoppers Drug Mart Corp. report on Tuesday.

Moore Corp., Royal Group Technologies and Sun Life Financial report on Wednesday.

Thursday brings Canadian Tire Corp., Canfor, Nexen, Trizec Properties and West Fraser Timber.

The week wraps up with news from BC Gas, Masonite International, Rogers Communications, Rogers Wireless Communications and TELUS.