Hearing how companies are faring

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - There is a huge test ahead for investors next week as one of the two big questions facing them is answered -- how companies are faring in the global recession.

They will also be newly cognizant after this week's Bank of England meeting of the idea that central banks will eventually exit from their economic reflation strategies, a concept that has already set off some jitters.

Concerns that the global economy may not be heading for as quick a recovery as some had hoped have combined recently with angst about corporate earnings to bring the red-hot March-June equity rally to a screeching halt.

World stocks as measured by MSCI .MIWD00000PUS, for example, are down around 4 percent so far in the third quarter after soaring a record 21.2 percent in the second.

Next week, though, the U.S. earnings season gets underway big time and the results are likely to set the tone for markets for much of the rest of the year.

"We'll need to see substantial improvements in economic and company fundamentals in order to sustain recent gains and expand the breadth of the rally," Enrique Chang, chief investment officer at American Century Investments said in a note.

As of Friday, two major U.S. companies had reported -- and given investors the same kind of mixed signals they are getting from economic data.

First, industrial bellwether Alcoa (AA.N) reported a third consecutive quarterly loss, but beat estimates by a large margin due to cost cuts. Them oil major Chevron (CVX.N) warned that second-quarter earnings would be hit by a sharp decline in U.S. refining margins.