* Some GDP upgrades for coming quarters, U.S. lower
* 2010 GDP outlook remains subdued despite market rally
* No U.S. or UK rate rises seen until late 2010
* Euro area, Japan rates seen on hold through end-2010
By Ross Finley
LONDON, June 16 (Reuters) - The outlook for the world's major developed economies has brightened slightly over the past month, a Reuters poll shows, but is far more subdued than the wave of optimism rushing through financial markets since March.
While many economists have tweaked up their outlook for the current quarter and for later this year, expectations for growth in 2010 remain mostly lacklustre and are little changed from May, let alone where they were in February.
The results, from a survey of about 250 economists across the U.S., Europe and Japan, contrast with jubilance on stock markets over recent sprouts of hope in economic data, such as a sharp narrowing in the pace of decline in U.S. non-farm payrolls in May and a big jump in consumer confidence.
The Standard & Poor's 500 index of leading shares <.SPX> has rallied about 40 percent since early March, but the consensus forecast for U.S. growth in 2010 has declined to 2.5 percent from 2.7 percent in February. It is unchanged from May.
With rising long-term bond yields raising concerns about how the nascent recovery will weather higher borrowing costs, the poll results provide for sobering reading and support for the view that equity markets may now need substantially better news to extend their climb.
"We expect the economic recovery to be slow, and the intensification of headwinds in the bond market and rising real interest rates may well delay a return towards a more entrenched path of trend GDP growth until late 2010," said Kenneth Broux, economist at Lloyds TSB Corporate Markets.
The policy rate outlook has not changed compared with last month, despite rising worries about inflation. Rates are seen on hold through the end of 2010 in the euro zone and Japan and modest rises are due late next year in the U.S. and Britain.
A separate question put to economists showed that Fed Chairman Ben Bernanke gets a high grade for his handling of the worst financial crisis and downturn since the Great Depression, earning 8 out of a possible 10 marks. [ID:nLAG003510]
The results come just days after finance ministers from the world's richest nations met in Italy and began to consider how to unwind rescue steps put in place for their economies once more concrete signs of recovery from the crisis emerge.
What is clear is that the outlook is getting increasingly tough to pin down. The range of possible outcomes from forecasts collected has been steadily on the rise throughout the crisis and is likely contributing to financial market volatility.
BRIGHTER BRITAIN?
Overall, the most remarkable change in the June poll results was the improved outlook for the UK compared with the euro zone. Until now, the consensus showed that the 16-member bloc had the better growth prospects.
A plunge in sterling, more aggressive and faster interest rate cuts from the Bank of England as well as a programme to purchase government bonds on the open market unmatched by the European Central Bank have all certainly helped.
Economists see the euro area growing 0.4 percent next year and the UK doing marginally better at 0.5 percent.
"The economic data continues to show improvement and surprise to the upside," noted George Buckley, chief UK econoimst at Deutsche Bank. "However, the nascent 'green shoots' recovery is contingent on continued policy support."
That relative degree of optimism has turned up in recent
days on currency markets where the pound has scaled to the
highest level this year against the euro to around 84 pence from
near-parity around the turn of the year.
In Japan, the near-term growth outlook is also improved but again but prospects for growth in 2010 remain very much subdued. A huge inventory run-down that led to the two biggest quarterly declines in GDP on record in Japan's post-War period mean that any pickup in demand from world markets is a positive. [ECILT/JP]
"Companies have worked off inventories both in Japan and abroad, which would be positive for the exports outlook," said Azusa Kato, an economist at BNP Paribas.
(For poll data click on [SURVEY/]) (Polling by Bangalore Polling Unit; Additional reporting by Nigel Davies in London, Pedro Nicolaci da Costa in New York, Mark Felsenthal in Washington, Hideyuki Sano in Tokyo; Editing by Andy Bruce)