Developments in the U.S.-led war offensive against Iraq are likely to dominate market attention this week, with not much in the way of economic or earnings news scheduled for release.

“CNN will capture more attention than CNBC, as war news trumps economic or corporate developments. More headway on the road to Baghdad should be a negative for bonds, favoring equities and the US dollar,” comments CIBC World Markets.

In Canada, January’s retail sales are due out on Monday. Industrial prices are to be released Thursday, along with budgets in Ontario and Newfoundland. Saskatchewan’s budget is due out Friday.

“January retail sales looked to be a mixed bag, with autos dragging the headline figure into a huge decline, but non-auto sales potentially quite buoyant. To this point, other reports on January economic activity have been very firm, and February followed-up with a large employment gain,” says CIBC World Markets. “Prospects further out, however, don’t look nearly as rosy, particularly with the key automotive sector cutting back North American production plans in Q2.”

BMO Nesbitt Burns says that the retail report for January is likely to display a split personality, as auto sales fell sharply in the month but preliminary results suggest activity elsewhere was solid. “This is likely to translate into a hefty 1.2% drop in headline retail sales for the month. However, a sturdy 0.7% rise in non-auto sales is expected to prevent an even steeper setback in the headline result.” Nesbitt also notes,” Even with the pullback in overall retail sales in the month, big gains in wholesale trade and manufacturing shipments are expected to support a 0.3% rise in GDP for January.”

In the U.S., the consumer confidence report will be out on Tuesday, durable orders on Wednesday, fourth quarter GDP is due Thursday, and Friday brings personal income and spending numbers and the Michigan consumer sentiment index.

“On the data front, it’s a fairly quiet week, with the always-choppy durable orders due for a weaker figure, and consumer confidence likely setting it’s low for this cycle given that most of the respondents were polled before the war began,” says CIBC.

Nesbitt agrees that the war will dominate financial market developments, noting that it expects the U.S. data to continue its winter parade of downhill results this week. Both the major confidence indexes are likely to be sliding lower, it says. “Durable goods bookings, ex-transportation, are coming off a very strong January reading. We believe a February skid is the best bet, although that does not rule out a much better post-war performance in the spring. On balance, the recent data show the factory sector is benefiting from needed inventory rebuilding and a weaker dollar, with more strength, apart from the auto sector, likely in coming months.”

There aren’t any notable earnings releases scheduled for the week, although this sort of lull in reporting usually opens the door for earnings warnings.