RPT-TOPWRAP 4-Markets eye US GDP data, European morale picks up

* Euro zone money supply, loans slow

* Euro zone sentiment, business climate rebound

* Fed meeting and U.S. GDP in focus, policy seen on hold

* Santander beats forecasts, ArcelorMittal disappoints

(Adds U.S. GDP forecasts) (For full crisis coverage, double click on [nCRISIS])

By Keiron Henderson and Alex Richardson

LONDON/SINGAPORE, April 29 (Reuters) - Morale among euro zone consumers and businesses is picking up, but reluctance by banks to lend and weak demand for borrowing means any recovery from recession is some way off, data showed on Wednesday.

The mixed picture from Europe will put U.S. GDP data, due at 1230 GMT, and a Federal Reserve policy meeting into sharp focus as investors look for clues the world's biggest economy might be bottoming out.

Figures from the 16-nation euro zone showed consumers and industry more optimistic than expected in April, adding to signs the economy could be close to its lows.

Growth in euro zone money supply slowed more than expected in March, however, and growth of loans to the private sector fell, the European Central Bank said. [ID:nLT862998] [ID:nLT862644]

With U.S. interest rates already close to zero, analysts will also be looking for any signs the Federal Reserve is ready to inject more money into the financial system. A Fed statement due at 1815 GMT following a two-day policy meeting will also be scrutinised for its outlook on the economy. [ID:nN28303396]

The U.S. government has pledged to spend trillions of dollars to try to shore up the financial system, and the Fed announced plans last month to pump $1.15 trillion more into the economy by buying mortgage debt and long-dated U.S. Treasuries.

The median forecast for first quarter U.S. gross domestic product called for a contraction of 4.9 percent in the economy on a annualised basis, but estimates ranged as deep as an 8 percent drop ECONUS.

SWINE FLU

The week's jitters over the flare-up of swine flu were easing a little as investors took a step back to await further developments to gauge the seriousness of the outbreak, which spread further on Wednesday and claimed a life in the United States. [ID:nLT877271.

U.S. President Barack Obama asked Congress on Tuesday for $1.5 billion to fight the flu outbreak in the United States as new cases around the world prompted fears a pandemic could snuff out any tentative sign of an economic upturn. [ID:nN28350228]

"The sentiment is not that of panic but that of caution. There is no indication on how bad the situation may get, so investors are guarded about taking new positions," said Alex Wong, director with Ample Finance Group in Hong Kong.

Economists welcomed cautiously the European sentiment data, although it followed a rocky patch in markets this week after concerns U.S. banks would need big capital injections and fears the flu outbreak could damp down hopes of economic revival.

"It is good news in itself. It is a much better than expected outcome and in face value, it suggests that the second quarter this year will be less miserable," said Daniele Antonucci, an economist at Capital Economics in London.

But Howard Archer at Global Insight in London was concerned about the lending survey, saying: "This is a worrying development, even allowing for the fact that it is also a reflection of reduced demand for credit as companies cut back on their borrowing in the face of markedly reduced business and a deteriorating outlook."

EARNINGS BOOST

European stocks recovered nearly 1 percent from the previous session's losses, boosted by stronger than expected earnings news, including numbers from Spain's Banco Santander (SAN.MC).

The world's largest steelmaker, ArcelorMittal (ISPA.AS), reported slightly worse-than-expected first-quarter results, but forecast a modest pick-up in the second quarter. [ID:nLS823057]

Results from German engineering giant Siemens (SIEGn.DE) boosted its share price but they coincided with data showing German engineering orders fell 35 percent on the year in March.

The figures marked a slowdown in the pace at which demand is dropping, but offering no sign of a turnaround. [ID:nLT825382] [ID:nLT862204]

Better-than-expected first quarter results had raised hopes that U.S. banks, kept afloat with massive infusions of public money, could have made it past the worst of the crisis.

But on Tuesday the Wall Street Journal quoted people familiar with the matter as saying Citigroup (C.N) may have to raise more capital after receiving preliminary results of its "stress test" by regulators. It said Bank of America (BAC.N) may need billions of dollars of new capital. [ID:nBNG438915]

The dollar fell against major currencies apart from the yen as investors sought out a little more risk after encouraging U.S. consumer confidence and house price data on Tuesday offset concerns about the banking sector and swine flu. [ID:nLT379617]

The gains in equities and a bigger than expected improvement in U.S. consumer confidence on Tuesday outweighed concerns over the impact of swine flu on the global economy to push oil above the $50 a barrel level. [O/R]

(Reporting by Reuters correspondents worldwide; Writing by Keiron Henderson; Editing by Malcolm Davidson)