TOPWRAP 8-Mixed signs on recovery as US consumer mood sours

* Obama says full economic recovery is still a way off

* U.S. consumers in early July in worst mood since March

* French, Italian industry data better than expected

* South Korea growth improves; India output tops forecasts

* Japanese wholesale prices slump, deflation grips

* U.S. stocks end week lower (For more on the financial crisis, click on [nCRISIS])

By Eric Walsh

WASHINGTON, July 10 (Reuters) - The global economic outlook appeared mixed on Friday, with promising data from parts of Europe and Asia offset by a drop in U.S. consumer sentiment, deflation in Japan and a warning from U.S. President Barack Obama that full recovery was still a way off.

Evidence began emerging earlier this year that the world's worst recession since World War Two might be bottoming out, and heartening data from France, Italy, South Korea and India suggest an upturn may not be far away.

Adding to the rosier prospects, the Organization for Economic Co-operation and Development reported that the outlook for its mostly wealthy member nations had improved in May, and said there were signs that the downturn in Canada, Britain, the United States, China and India had bottomed.

"OECD composite leading indicators for May 2009 point to tangible signs of improvement in the outlook of most OECD economies," it said in a report. [ID:nLA471686]

But the view from the world's largest economy has been tempered by a continued rise in unemployment, raising concern about consumers' ability to spend and spur demand.

"Full recovery is still a way off. It would be premature to begin winding down our stimulus plans," Obama said on the final day of a G8 meeting in Italy. [ID:nLA178345]

The Reuters/University of Michigan Surveys of Consumers said its preliminary index of U.S. confidence for July fell to 64.6 from the final reading for June of 70.8, mainly due to mounting concerns about an extended economic downturn, job security and wealth erosion.

July's preliminary reading, the most pessimistic since March, was well below economists' median forecast for 70.5 [ID:nN10508844].

"It underlines the ongoing gloom facing the U.S. consumer and further delays prospects for a near-term recovery. That will weigh heavily on risk sentiment," said Brian Dolan, senior currency strategist with Forex.com in Bedminster, New Jersey.

In Washington, U.S. Treasury Secretary Timothy Geithner proposed clamping down on dealers in freewheeling markets for little-understood derivatives that helped create a crisis in U.S. and world financial markets. For two congressional panels, Geithner laid out proposals that would put big dealers like JPMorgan Chase (JPM.N) and Goldman Sachs (GS.N) under much stronger supervision than was the case in the past.

In Detroit, a new General Motors GMGMQ.PK emerged from bankruptcy protection much faster than most industry-watchers had expected -- as a leaner automaker pledging to win back U.S. consumers and pay back taxpayers.

The development, which follows a similar fast-track reorganization of Chrysler, represented a victory for the Obama administration and its commitment to save jobs and prevent a liquidation of the largest U.S. automaker.

STOCKS, OIL DOWN -- TREASURIES, DOLLAR UP

Stock markets worldwide were weaker amid uncertainty about company earnings and recovery prospects, while the dollar and yen rose against most currencies and oil prices fell, with U.S. crude futures ending below $60 a barrel.

A downbeat earnings outlook from oil major Chevron Corp (CVX.N) after Thursday's market close fueled the bearish trend.

On Wall Street, stocks ended lower, with the Dow Jones industrial average .DJI. off nearly half a percent for the session and 1.6 percent for the week. The Dow and S&P 500 were both down for the fourth week in a row. U.S. Treasury prices climbed Friday on the latest signs of economic weakness. [ID:nN10516332]

European shares fell, with the FTSEurofirst 300 .FTEU3 closing down 1.1 percent. Japanese shares .N225 closed a touch lower for the eighth straight day of declines.

French industrial output for May rose from the previous month instead of staying flat as had been expected, while Italy's May output was flat month-on-month, rather than reverting to a negative trend as forecast. [ID:nLA669656] [ID:nLA509512]

May output data from Germany also provided hope that the worst is over. Finance Minister Peer Steinbrueck supported that view on Friday, a day after a government official said the recession may have ended in the second quarter.

"There are initial signs that the slump may have bottomed out, but I'm very cautious here," Steinbrueck told German television station ARD. [ID:nLA341153]

MIXED NEWS FROM ASIA

The Bank of Korea reported that Asia's fourth-largest economy grew at its fastest pace for 5-1/2 years in the second quarter, although it is still expected to shrink overall this year.

Industrial output in India jumped 2.7 percent in May from a year earlier, almost double the forecast rate.

Quarterly results from India's leading outsourcing company Infosys (INFY.BO) also beat forecasts, further evidence that Asia's third-biggest economy is gaining momentum. [ID:nBOM468675]

But Japanese wholesale prices fell at a record pace in June, showing that the world's No. 2 economy is still struggling with slack demand despite some recent tentative signs of improvement in its manufacturing sector.

Wholesale prices fell 6.6 percent from a year earlier, reinforcing fears that Japan was poised for a second damaging spell of deflation this decade. [ID:nT283452]

IMF chief Dominique Strauss-Kahn used this week's summit of Group of Eight industrial nations to renew warnings that even as the world economy was on track for a recovery next year it would be premature to abandon stimulus policies. [ID:nL9173631] (Reporting by Eric Walsh; Additional reporting by Reuters correspondents worldwide; Editing by Gary Hill)