* Growth data to revive central bank policy speculation
* Bid for safety and search for yield to dominate
* Earnings season enters full swing
By Richard Hubbard
LONDON, July 20 (Reuters) - Investors will find out in the coming week whether the restrained response of the world's major central banks to the latest signs of a global economic slowdown has been warranted.
The United States and Britain release their first estimates of second quarter growth while a survey of purchasing managers' intentions across the euro zone will also hit the screens along with a steady flow of corporate earnings.
But the approaching seasonal lull means few in the markets expect any big shift in sentiment, and most see the current bid for safety by some and the search for yield by more aggressive investors being extended.
"We're into month-end week, we're into the Olympics and we're into holidays," said Suki Mann, head of credit strategy at Societe Generale.
After Federal Reserve Chairman Ben Bernanke refrained from signaling more monetary easing in his semi-annual testimony to Congress, and the European Central Bank earlier this month cut its rates, safety and yield have dominated investment trends.
In Europe this has manifested itself in a rush of funds into top-rated government debt markets and away from the riskier bonds of countries like Spain and Greece.
Spain had to pay about 6.5 percent to borrow five-year funds at an auction in the past week, while investors chose to pay the governments of Germany, the Netherlands and Switzerland to park their cash with them for shorter durations.
The risk premium demanded by investors to hold Spanish 10-year government bonds rather than the safer German equivalent also hit a euro-era high on Friday as fears grew that Madrid will soon need international help to fund its budget.
Greece will be back in investors' sights in the coming week when officials from the International Monetary Fund, European Commission and ECB return to Athens to decide whether to release further funds from a 130 billion euro bailout package.
The ECB added to the concerns when it decided to stop accepting as collateral Greek sovereign bonds and other assets backed by the country's government for use in money market operations from July 25.
In the foreign exchange markets Europe's escalating debt crisis, poor economic outlook and low interest rates have sent the shared currency to record lows against both higher-yielding currencies like the Australian dollar and perceived safe havens such as the Japanese yen.
Another beneficiary of the shifting flows has been the euro-denominated corporate debt market.
"July so far has been unexpectedly fantastic for the asset class," said SocGen's Mann.
The iBoxx Euro Corporate Bond index, which tracks the performance of high grade, euro-denominated corporate debt, is up 8 percent this year and 2 percent just this month.
Meanwhile in the equity markets a fear over the outlook for corporate profitability as world growth slows and Europe's debt crisis drags on has not prevented solid gains in share prices in the second half of the year.
The FTSEurofirst 300 index of top European firms posted its best consecutive weekly run in seven years over the past week and has risen 12 percent since June 4, its 2012 low. However, it did fall 14.5 percent over the previous 12 weeks.
The MSCI world equity index is also showing gains of over 5 percent since the end of May, while the S&P 500 index of major U.S. companies is up around 4.8 percent.
The key in the coming week will be what impact second quarter results have on this rally.
"It's too early for complacency, but the omens are encouraging," said Graham Bishop, senior equity strategist at Exane BNP Paribas.
Exane research found that of the 51 European companies that have reported so far, earnings per share have on average been about 1.2 percent above consensus forecasts.
In the United States, with 20 percent of the S&P 500 having published results, the equivalent number is 3.2 percent.
But investor confidence remains fragile.
A survey by Bank of America Merrill Lynch (BofAML) of fund with around $708 billion under management done in early July found the share rally since June had not improved sentiment.
"Rising equity prices have failed to lift investor gloom and we still see a quarter of investors expecting a global recession while hopes for further policy easing have been delayed," said Michael Harnett, BofAML's chief global equity strategist.
Much will depend on what happens to the giant U.S. economy.
Economists have been steadily cutting their forecasts for the second quarter, due out on July 27, with the average estimate calling for annualised growth of 1.8 percent, down from 1.9 percent in the previous three months.
In the UK, the economy is expected to contract by 0.2 percent in the April-June period, its third successive quarter of falls, but economists do expect the Olympics which begin on July 27 to provide a boost for the current quarter.
"For the year as a whole it is fairly sluggish growth," said David Tinsley, UK economist at BNP Paribas. "But the momentum is at least building in the sense that the second half of this year will be better than the first."