RPT-GLOBAL MARKETS WEEKAHEAD-Divisions dominate as Q3 begins

(Repeats Friday story without changes)

By Jeremy Gaunt, European Investment Correspondent

LONDON, July 3 (Reuters) - Investors have entered the third quarter deeply divided about what should be happening on financial markets.

While some reckon the global economy is well on the mend and therefore it is time to put more money into stocks and riskier assets, others see fragility and danger, and remain cautious.

With a relatively light data agenda and the next corporate earnings season yet to get fully under way, the coming week is unlikely to see an end to the dispute.

What investors need for a firm commitment to riskier assets -- one that can sustain the relief rally of the last quarter -- is concrete evidence that banks have begun normal lending, consumers are spending and that the economy is growing.

June's U.S. payroll data, which was far worse than expected, provided the opposite message on the economy and brought out the bears. "(It) suggests that the alleged `green shoots' are mostly yellow weeds that may eventually turn into brown manure," economist Nouriel Roubini wrote on his RGE Monitor blog.

But others expect the generally improving economic picture to continue emerging next week, including in Monday's U.S. ISM non-manufacturing data and Friday's Michigan consumer sentiment report.

This disparity of views has led to something of a hiatus on stock markets. While world stocks .MIWD00000PUS gained more than 21 percent in a record second quarter, they traded more or less flat in June.

"After having reacted quasi-euphorically to the first hopes that the recession may end soon, the market is now wondering about the timing, nature and strength of the expected economic recovery," BNP Paribas Investment Partners said in a note.

EARNINGS AHEAD

A key to this may come from the new earnings season. This does not start properly until the week after next, but there could be a taster on Wednesday when aluminium giant Alcoa (AA.N) reports.

Thomson Reuters Proprietary Research calculates that analysts expect S&P 500 .SPX earnings to have dropped an average 35.5 percent in the second quarter. There have been 56 negative earnings-per-share pre-announcements heading into the reporting season and 37 positive ones, it says.

Analysts' views on how stock markets will end the year ranged widely in Reuters polls released this week. The consensus was for the S&P to gain another 8 percent, European shares 3 percent and Japan to end flat. [ID:nLU605014]

Some people are more upbeat. Barclays Wealth advised its clients this week to increase portfolio risk levels to normal, due to growing evidence that the decline in economic activity is ending.