By Jeremy Gaunt, European Investment Correspondent
LONDON, April 24 (Reuters) - Investors have pushed stock markets up to the point where some of the drive has sputtered, but they still appear more inclined to embrace good news and ignore the negative.
Although equities are now more expensive than they were after a near 30 percent rise for global stocks and many major investors still consider the March-to-April gain to be a bear market rally, there has been little sign of retrenchment.
This may be tested in the coming week, however, as the results of examinations of U.S. banks leak out and some key U.S data on growth is released.
Globally, equity markets have been showing what for many is a surprising degree of resilience. Having gained for six weeks in a row, the MSCI all-country world index was heading for nothing worse than a mild weekly loss on Friday.
Since March 9, the index has risen as much as 29.6 percent. That said, it is still some way from its early January high and is down more than 3.5 percent for the year to date.
While the sustainability of the rally has been questioned by some -- Societe Generale's bearish Albert Edwards says a reversal will cause a "catastrophic loss of confidence" -- to date it has only been dented by poor news, not wrecked by it.
Investors appear to be seeking out the positive, wherever they can find it, and turning away from bad news.
U.S. stocks rose on Thursday, for example, on better-than-expected results from regional banks such as PNC Financial Services.
This came despite disappointing earnings from economy bellwether United Parcel Service and data showing that existing homes sales fell in March to a much lower-than-expected annual rate.
GLIMMERS
What has driven the market forward is a combination of shares having fallen so far last year and into 2009 with tentative signs of economic recovery.
"In recent weeks, there have been some encouraging signs that the global economic downturn may be slackening," U.S. Treasury Secretary Timothy Geithner wrote in Friday's Financial Times.
"Conditions in some financial markets have improved and the decline in world trade may be abating."
Many analysts and economists are particularly noting that lack of production now means company warehouses are empty of inventory -- usually a sign that production will pick up.
"We have seen a lot of de-stocking in the last six to nine months and we will see a re-stocking of the global economy in the second half of the year," Folker Hellmeyer, chief analyst at Bremer Landesbank, told Reuters financial television.
"That will have a ... positive impact on the global growth picture." he said.
Markets will get a big taste of the state of growth on Wednesday when U.S. first quarter Gross Domestic Product data is to be released.
A preliminary Reuters survey of economists showed that growth was on average expected to have contracted by an annualised 5 percent in the quarter.
Given the current mood of investors, if the data matches that or shows less of a contraction, stocks likely would gain and bonds sell off.
That might even happen if the data is simply not as bad as worst case scenarios.
STRESS AHEAD?
Markets, however, will have a new potential headwind to deal with related to banking, the issue that most rocks them.
U.S. regulators are conducting "stress tests" of the 19 largest U.S. banks, including Citigroup, JPMorgan Chase & Co and Wells Fargo, to try to find out how much capital any big bank might need should the recessionary economy deteriorate further.
The final results are not due until May 4, the week after next, but the banks themselves are to get a read out later on Friday.
It would be most unusual if some of the findings did not leak out or rumours fly over the next week, potentially making markets volatile.
The process is actually a difficult one for the regulators because they will need to be credible but at the same time will have no desire to spook the markets.
But even here investors appear to be accentuating the positive.
"We would be surprised to see a large number of U.S. banks failing a stress test devised by the authorities who are underpinning and have capital stakes in these banks," said Richard Batty, a strategist at Standard Life Investments.
Then again, that could set up markets for trouble if the tests are bad. (Additional reporting by Mark Felsenthal and David Lawder; Editing by Andy Bruce)
(To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Hub click on http://blogs.reuters.com/hedgehub)