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There are a number of reasons to be cautious about the prospects for the global economic recovery.

It's against this background that U.S. Federal Reserve Chairman Ben Bernanke will step before Congress for his semi-annual testimony on Wednesday. He will likely be barraged with questions about Friday's jobs report -- a report so across-the-board disappointing that JPMorgan economist Michael Feroli called it "worse than Spinal Tap's 'Shark Sandwich.'"

The U.S. economy created just 18,000 jobs in June, much less than the 90,000 economists had expected.

A U.S. retail sales report may offer a little bit of hope on Thursday if it shows Americans spent money left over from a recent retreat in gasoline prices on other items.

"We're in a situation where the data is noisy and choppy," said Michael Hanson, a senior economist at Bank of America.

"For a central banker, you're now in risk management mode: 'We want to be ready to calm the markets in case we get more bad data, but we don't want to jump the gun, either.'"

Bernanke has argued that the biggest factors affecting growth in the first half of the year are temporary in nature: supply disruptions due to the Japanese earthquake, inclement weather and a surge in oil prices earlier this year.

He is expected to stick to that assessment.

"The weak jobs report does not rule out a second half recovery by any means. Employment is something of a lagging indicator," said Dean Maki, economist at Barclays Capital.

"It depends on consumer spending and we are focusing intently on retail sales as one of the first signals of how consumers are responding to the decline in gasoline prices."

In addition, U.S. industrial production and manufacturing data on Friday may show the Japanese earthquake-induced supply chain disruptions to auto production and sales have eased somewhat.

Japan's central bank, which meets on July 11-12, will likely revise up its assessment of the economy next week as companies restore supply chains more quickly than expected. Factory output is seen returning to pre-quake levels in August. The BOJ is expected to hold off easing monetary policy further, though it will likely warn of lingering risks to the global economy.

NO QUICK-FIXES

One of those risks is Europe's escalating debt crisis.

Euro zone finance ministers are set to meet on Monday to discuss a second bailout package for Greece.

But given the absence of a decision on how private bondholders might participate in any Greek debt rollover, markets are skeptical of how much progress can be made at the Eurogroup meeting.

Markets want European policymakers to come up with longer-term solutions rather than one temporary fix after the other if they are to avoid a domino effect as financial markets pounce on other weak euro area countries.

Contagion is already evident from the growing risk premia on debt issued by Spain and Italy, which some analysts view as a warning signal. Lower-rated euro zone government bonds have faced increased pressure since Moody's cut Portugal's credit rating to junk last week.

"There is not expected to be much of a resolution, so all together there is a lot of asymmetric risk out there," said Mark McCormick, currency strategist at Brown Brothers Harriman.

China raised interest rates for the third time this year on Wednesday as taming inflation remains a top priority even as the pace of growth in its vast economy slows.

Risky assets, particularly those with direct links to China's growth, sold off after the announcement on concerns the latest monetary tightening could choke an already sluggish global recovery.

On Wednesday, July 13, China will get a read on its second-quarter economic growth data and retail sales for June. Chinese consumer sentiment is expected to have been weighed down by surging inflation and high property prices.

"Unlike in Japan and the U.S., where we believe growth has slowed for temporary reasons, policy tightening in the euro area and China seems likely to yield a more persistent slowing in growth," Barclays' Maki wrote in a note to clients.

(Reporting by Kristina Cooke; Editing by Dan Grebler)

Analysts have been lowering earnings estimates of late and nervousness about the U.S. economic picture abounds, especially after Friday's poor June jobs report.

However, profit growth could still be strong in the second quarter -- and that could boost stocks. The Standard & Poor's 500 .SPX fell 0.4 percent in the second quarter, but rallied in recent days on hopes for economic improvement.

Over the last month, analysts have revised downward their earnings estimates for S&P 500 companies, with the mean change in earnings estimates a negative 6.4 percent, according to Thomson Reuters StarMine data.

"I think there's going to be a lot of anxiety going into it, and I think companies are going to continue what they've done for the last few quarters: Put out better-than-expected numbers, and guidance should be OK," said Scott Billeaudeau, portfolio manager at Fifth Third Asset Management, in Minneapolis.

S&P 500 components' earnings are expected to have increased an average of 7.3 percent in the second quarter from a year ago, down from first-quarter growth of 18.9 percent, Thomson Reuters data showed.

But the number could jump if most companies beat analysts' forecasts. Early estimates for first-quarter profit growth were at about 13 percent.

"The general economic data is suggesting some softness in the overall economy both globally and in the U.S. ... so that drives somewhat more realistic expectations for companies," said Natalie Trunow, chief investment officer of equities of Calvert Investment Management in Bethesda, Maryland, which manages about $14.8 billion.

This week, investors will get a steady stream of economic indicators along with the earnings reports. The international trade deficit for May and minutes from the Federal Reserve's June meeting will be released on Tuesday. Retail sales and the Producer Price Index for June will come out on Thursday, followed by the Consumer Price Index for June on Friday.

BANKS UNDER THE GUN

Financial services companies have seen the biggest downward revisions in earnings estimates in the last 30 days, with banks taking some of the biggest hits, including Goldman Sachs (GS.N) and Morgan Stanley (MS.N).

JPMorgan Chase (JPM.N) will be the first of the big banks to report, with results due on Thursday. Results from top tech player Google (GOOG.O) also are expected Thursday, while aluminum company Alcoa (AA.N) unofficially starts the season with earnings after the bell on Monday.

The S&P financial index .GSPF dropped 6.3 percent in the second quarter as worries escalated about the impact of the euro-zone debt problems on the global economy. The mean change for earnings estimates in the sector in the last 30 days is a negative 34.4 percent, StarMine data showed.

DISASTERS AND DISAPPOINTMENTS

Analysts have also said the aftermath of Japan's earthquake, months of extraordinary weather in the United States, and rising food and commodity prices took a toll on companies in the second quarter.

StarMine analysis showed companies, including Platinum Underwriters Holdings (PTP.N), were likely to disappoint with results because of tornado damage claims.

But companies have kept costs in check and that should support stronger results, while also giving a boost to stock prices, Billeaudeau said.

"I think things underneath the macro, global, political noise continue to percolate," said Mike Jackson, founder of Denver-based investment firm T3 Equity Labs. But "you're going to see higher-quality companies showing the surprises this quarter (versus) last."

Based on his own analysis, he expects industrials and utilities to surprise to the upside, especially for companies involved in "machinery, and roads and rails" and for electric utilities.

On the flip side, he sees a high probability for earnings disappointments in health care, consumer staples and materials sectors.

An S&P health-care index .GSPA led gains in the S&P 500 in the first half of the year as the market shifted to defensive shares, with the sector up 14 percent since the start of the year, followed by an S&P energy index .GSPE, up 11 percent.

The health-care sector may be subject to profit-taking once earnings start after its strong run so far this year, according to Tobias Levkovich, Citigroup's chief U.S. equity strategist, who made the point in a research note.

Some analysts expect total upside surprises to be less than in previous quarters, with the percentage of companies beating expectations likely to fall in the mid-60s percentage range, below the 70 percent range, where it has been.

S&P 500 earnings overall could beat estimates by a "modest" 1 percent to 3 percent, Charles Blood, senior market strategist at Brown Brothers Harriman, wrote in a research note.

"Margins typically rise in the second quarter," Blood wrote, "but our primary concern and one of the biggest investment debates, is, 'How much room do companies have for further improvement?'"

(Reporting by Caroline Valetkevitch; Editing by Jan Paschal)

Murdoch, 80, swept into his London headquarters in the front passenger seat of a red Range Rover car, holding up the last edition of the best selling newspaper, the News of the World, that he had closed hours earlier in a bid to contain the crisis.

Wearing a white panama-style hat, he ignored reporters massed at the entrance, focusing his attention on the newspaper he bought in 1969 as the cornerstone of a vast media empire. His car sped out of the complex again 15 minutes later but it was not clear what meetings he had planned

Best known for its lurid headlines exposing misadventures of the rich, royal and famous, the last News of the World said simply "Thank You & Goodbye" over a montage of some of its most celebrated splashes of the past 168 years. For admirers it had been a stock feature of lazy Sundays, for critics it had become a symbol of craven irresponsibility in the British media.

"All human life was here," the News of the World declared.

Murdoch had seemed on the point of clinching approval for a cherished prize, the buyout of broadcaster BSkyB, only last week; but revelations phone-hacking had extended beyond celebrities to relatives of a murdered girl, of victims of 2005 London bomb attacks and of soldiers killed in action stirred broad public anger.

Editor Colin Myler told media massed outside the newspaper's offices he deeply regretted the newspaper's closure.

"This is not where we wanted to be and it's not where we deserve to be, but as a final tribute to 7.5 million readers, this is for you and for the staff, thank you."

The scandal has raised questions about relations between politicians, including Prime Minister David Cameron -- who hired a former editor of the paper as his spin doctor -- and media barons such as News Corp chairman and chief executive Murdoch.

It has also brought to light accusations that journalists working for Murdoch and others illegally paid police for information. A senior police officer said the London police force had been 'very damaged' by its failure to press an initial investigation into telephone hacking at the News of the World.

Cameron's opponents have scented an opportunity in their efforts to block Murdoch's $14 billion bid for the 61 percent of the profitable pay-TV operator BSkyB that News Corp, the world's largest news conglomerate, does not already own.

Previously, those looking at whether Murdoch should get the go-ahead have focused on whether it would give him too much power over Britain's media.

But allegations that senior editors were involved in illegally accessing thousands of voicemail messages and paying police for information to get scoops have now prompted the regulator Ofcom to say it will consider whether News Corp directors are "fit and proper" persons to run BSkyB.

The government has received more than 135,000 public complaints against the BSkyB deal.

Cameron came under growing pressure on Sunday to halt Murdoch's bid for BSkyB, at least until an investigation into phone-hacking had been completed.

Labour opposition leader Ed Miliband said he would force the issue to a parliamentary vote this week if Cameron failed to act.

"He needs to make clear that BSkyB cannot go ahead until the investigation is complete," Miliband told the BBC's Andrew Marr program.

Pressure came too from members of the government's junior coalition partner, the Liberal Democrats, who have traditionally had a less cozy relationship with Murdoch. Deputy LibDem leader Simon Hughes said he would be prepared to back Labour's call for the deal to be postponed and urged other LibDems to do the same -- setting the stage for a major test of the coalition's unity

"LET DOWN"

"We've been let down by people that we trusted, with the result the paper let down its readers," the News Corp chief executive said as he left a media conference in Idaho.

News Corp shares fell more than 5 percent in New York last week.

Neither Cameron's office nor the Department for Culture, Media and Sport plan to speak to him during the visit, spokespeople said. Police declined to comment on whether they would try to speak to him.

The prime minister's close links with those at the heart of the scandal mean he too has been damaged by it but analysts say that, with probably nearly four years until a parliamentary election, he is unlikely to be sunk by it.

Cameron, a friend of former News of the World editor Rebekah Brooks, joined calls for her to step down as chief executive of News Corp's News International arm at a news conference on Friday where he admitted politicians had been in thrall to media for years, and ordered a public inquiry.

British police on Friday arrested Andy Coulson, the former spokesman for Cameron who had resigned as News of the World editor in 2007 after one of his reporters and a private investigator were convicted of hacking the phones of aides to the royal family. Coulson has also said he knew nothing about the phone hacking.

"HACKING WAS STANDARD PRACTICE"

A senior police officer told the Sunday Telegraph that voicemail hacking had been "standard practice" at the News of the World and that its executives had failed to cooperate fully with police during an investigation in 2005-06.

He said the new investigation had been prompted by "material that was completely available to them in 2005-06."

"It makes their assurances in 2005-06 look very shaky."

The Sunday Times said at least nine journalists and three police officers were facing jail in connection with the hacking scandal and quoted senior police officers as saying it was likely there would be further arrests soon.

Murdoch said on Saturday that Brooks, who was editor of the News of the World at a time when many of the alleged hacking incidents were taking place, had his "total" support. She denies knowing of the practice during her watch.

"I'm not throwing innocent people under the bus," he said.

Asked if he planned any management changes, for example in the responsibilities of his son and heir apparent James, he said "No." "Nothing's changed," he told reporters.

Some 200 people at the News of the World are losing their jobs.

At London Bridge railway station, copies of the last edition were selling well, said newspaper vendor Jean Natella.

"I think it's a shame because they've done a lot of good, they've riddled out a lot of, lets say, nasty people," she said. "It's unfortunate that a few people have brought it down. But they have got no choice because they condemned others so they have got to show they are accountable."

Others were less charitable.

"The specter of the old Murdoch, the one whose demise was signaled last week -- powerful, voracious and threatening -- must not be allowed to rise again from the ashes of the News of the World," said an editorial in The Observer, a rival weekly.

The Guardian newspaper said on Saturday police were investigating claims a News International executive may have deleted millions of emails from an internal archive in an attempt to hamper investigations. A News International spokeswoman said the allegation was "rubbish."

"We are cooperating actively with police and have not destroyed evidence."

Cameron fleshed out on Sunday how inquiries into the scandal, announced on Friday, would work.

The first, a judge-led inquiry to be held in public, will cover phone hacking and criminal activity and look at the way the police investigated allegations against the News of the World, and the relationship between newspapers and the police.

The second inquiry will be asked to recommend a new framework for press regulation.

(Writing by Ralph Boulton)

(Additional reporting by Olesya Dmitracova, Jodie Ginsberg, Christina Fincher, Sarah McBride, Sudip Kar-Gupta; Writing by Alison Williams; Editing by Kevin Liffey and Janet Lawrence)