TOPWRAP 8-IMF sees 2010 growth; G8 frets over risks

* G8 to warn it is too early to withdraw stimulus

* US official: no talk in White House of second stimulus

* Wall Street closes flat, European shares down

* OPEC says may take years for oil demand to recover

* Alcoa kicks off U.S. earnings reporting season

(For more on the financial crisis, click on [nCRISIS])

By Jackie Frank

WASHINGTON, July 8 (Reuters) - The fragile recovery from the worst global recession since World War Two will slowly pick up pace into next year, the International Monetary Fund said on Wednesday, but world leaders agreed stimulus spending must remain in place until the economic turnaround is secure.

Fears that high unemployment and slow consumer spending could strangle the nascent recovery pushed Wall Street lower for much of the day before U.S. stocks ended little changed. [ID:nN08409947]

The quarterly earnings season got underway after the U.S. market close with Alcoa Inc (AA.N) posting a smaller loss than analysts had expected and its shares rose. [ID:nN08471164]

European shares posted losses, led by financials, oil producers and automakers.

In a sign the economy may not be out of the woods, oil fell to under $61 a barrel from last month's peak of $70, and OPEC said world demand for its oil may take years to recover. [OPEC]

While the IMF's latest World Economic Outlook said the global economy is likely to decline 1.4 percent, slightly steeper than the 1.3 percent contraction it saw in April, it foresaw a stronger recovery next year. Economic growth could hit 2.5 percent in 2010, a more optimistic figure than the 1.9 percent the IMF reported in April. [ID:nN08376464]

Rounds of interest rate cuts and an estimated $5 trillion of dollars in public funds have helped to prevent the deepest global recession in decades from turning into a depression.

However, doubts that consumers and private businesses will be ready to ramp up spending prompted warnings from the IMF and others that governments would risk killing the recovery if they removed the life-line too quickly.

Leaders of the Group of Eight industrial nations, meeting in L'Aquila, Italy, essentially agreed, saying the recovery is not yet assured and that it is too soon to unwind economic growth packages. "Significant risks still remain to economic and financial stability," according to a draft document by the G8 -- United States, Germany, Japan, France, Britain, Italy, Canada and Russia. [ID:nL8395794]

Expectations the recession is bottoming out in Europe's biggest economy received a boost with data showing German industrial output had bounced back strongly in May, up 3.7 percent, beating analysts' forecasts for a 0.5 percent gain.

"It is far too early to declare the return of Germany's growth engine," said Carsten Brzeski, an economist at ING Financial Markets. "The last two days were good news for the future stabilization of the German economy. For a sustainable recovery, however, much more of the same will be needed."

Although U.S. unemployment stands at 9.5 percent, White House budget official Robert Nabors told lawmakers that orders for durable goods were turning upward. That showed the stimulus was having a positive impact, he said, and in the near future the country would see "genuine economic expansion and crucial job creation."

U.S. President Barack Obama's administration is not talking of a second stimulus package, Nabors said, an idea brought up by an outside economic adviser on Tuesday, the focus is on the $787 billion stimulus program already in place.

Asked about a second stimulus plan, White House spokesman Robert Gibbs told reporters Obama "won't hesitate" to take the steps necessary to help the economy.

FRAGILE RECOVERY

On the eve of the G8 summit, British Prime Minister Gordon Brown told Reuters that the world had to wake up to the scale of the downturn and stay focused on restarting growth, although Canada said existing measures must be implemented before any talk of further action. [ID:nL7366078]

Signs of the fragility of the recovery were seen in world financial markets, oil product stocks, currencies and exports.

The dollar fell against the yen, which surged in its biggest jump in months as investors concern about the global economy led them to shed risk. The euro initially turned positive on the German data, though it later was down against the dollar and yen.

Lingering sluggish demand due to the weak economy was blamed for the higher-than-expected U.S. inventories of refined oil products in the week. Distillate supplies, including diesel and heating oil, hit a 25-year high.

"Distillate stocks are showing signs that the economy has not had any real improvements yet," said Mike Zarembski, senior commodities analyst at optionsXpress in Chicago.

At the G8 meeting in L'Aquila, Italy, Russian President Dmitry Medvedev's spokeswoman said he called a $70-$80 per barrel price for oil "fair" but added that oil prices could not be regulated by government administration. [ID:nL882030]

The Dow Jones industrial average .DJI gained 14.81 points, or 0.18 percent, to close at 8,178.41. The Standard & Poor's 500 Index .SPX dropped 1.47 points, or 0.17 percent, to 879.56. The Nasdaq Composite Index .IXIC added 1.00 points, or 0.06 percent, to 1,747.17.

The FTSEurofirst 300 .FTEU3 index of top European shares closed 1.1 percent lower at 817.12 points. The fifth consecutive drop also marked the index's longest losing streak since mid-January. London's FTSE 100 .FTSE ended 1.1 percent lower at 4140.23, its third day of losses.

Asian stocks .MIAPJ0000PUS had tracked Wall Street's sharp Tuesday losses with Japan's Nikkei average .N225 sliding 2.4 percent to a six-week low on Wednesday. [MKTS/GLOB]

Encouraging data in recent weeks has been tempered by persistent signs of economic weakness, with China and Japan on Wednesday offering contrasting pictures.

Chinese banks in June extended 1.53 trillion yuan ($223.9 billion) in loans as the government seeks to hit an eight percent growth target this year.

In Japan, the value of its core private-sector machinery orders, a leading indicator of capital spending, slumped 3 percent in May to a record low, defying expectations of a rise. And company bankruptcies jumped more than 18 percent in June and were up 7.4 percent from a year earlier.

A steep drop in exports and corporate investment led to euro zone economy contraction of a record 2.5 percent in the first three months of 2009, although depleted stockpiles in the 16-nation area raised hopes of a better second quarter. [ID:nL31007526] (Reporting by Darren Ennis and Daniel Flynn in L'Aquila, Leslie Wroughton in Washington and Reuters correspondents around the world; Writing by Jackie Frank; Editing by Tim Dobbyn)