* China investment surges, adding to recovery hopes
* ECB's Noyer warns on jobs, sees growth end 2009/mid-2010
* Japan Q1 GDP record low, slow rebound seen
* Mounting deficits feed worries about U.S. economy
By Jason Subler and Jon Boyle
BEIJING/LONDON, June 11 (Reuters) - Chinese investment surged in May, fuelling hopes the world's third-largest economy could lead a global recovery that some European policymakers saw on a firmer footing in 2010.
A record slump in Japan's first quarter GDP reinforced expectations that any rebound would be slow, however, and European officials said jobs would lag any return to growth.
"The (global) economy should start to turn into positive territory somewhere between the end of this year and the middle of next year," European Central Bank policymaker Christian Noyer told Hong Kong businessmen on Thursday.
Noyer said rising unemployment could still hurt consumption and growth prospects. German Deputy Finance Minister Joerg Asmussen echoed the jobs warning, even as he confirmed he saw Germany returning to growth of 0.5 percent in 2010.
"You can say that there are first signs of a stabilisation in the world economy," Asmussen told reporters. "But the timing and speed of a recovery are uncertain."
Global data has given increasing signals of a rebound from the deepest recession in six decades, driving stock markets sharply higher from a March trough.
U.S. May retail sales data and weekly jobless claims, both due at 1230 GMT, may give more clarity on the health of the world's largest economy.
But financial markets still worry that huge U.S. government spending and Fed cash injections will spark inflation and undercut any nascent rebound.
Market attention on Thursday focused on a 30-year U.S. Treasury auction, after a disappointing Wednesday sale pushed yields on the benchmark 10-year Treasury note above four percent for the first time in eight months. That suggests it will cost the U.S. government more to finance its growing budget deficit.
"The risk of rising yields should not be discounted," said Joseph Brusuelas of Moody's Economy.com. "If continued, they will reduce home mortgage refinancing and curtail corporate borrowing, both critical to an economic recovery."
STIMULUS PLAN
The ECB said in its monthly bulletin on Thursday that its non-standard steps to ease credit would take time to feed through to the real economy, echoing a statement read by President Jean-Claude Trichet last week after the bank kept interest rates at 1.0 percent.
Even so, Asmussen said finance ministers from the Group of Eight industrial powers meeting in Lecce, Italy, this weekend would discuss "credible exit strategies" from the crisis policy measures which governments had taken.
"As soon as the economy has found its footing again, expansive impulses must be rolled back. And that also concerns monetary and fiscal policies," he said.
China has sought to cushion the blow from falling exports with a 4 trillion yuan ($585 billion) economic stimulus plan.
Data on Thursday showed annual growth of fixed asset investment in Chinese urban areas accelerated to 32.9 percent in the January-May period from 30.5 percent in the first four months of the year, suggesting the stimulus is working.
"This is a welcome sign of momentum building in the Chinese economy, and it's good for the global outlook," said David Cohen of Action Economics in Singapore.
Underpinned by this optimism, commodity-related stocks in Asia rose for a third straight day while oil prices extended gains to seven-month highs.
The International Energy Agency on Thursday upgraded its 2009 world oil demand forecast for the first time in almost a year, saying 2009 demand would fall to 83.3 million barrels per day, a less steep decline than previously forecast
China's need for government pump-priming was underlined by May customs data that showed exports fell 26.4 percent on the year, while imports fell 25.2 percent, resulting in a trade surplus of $13.4 billion, compared with $13.1 billion in April and $18.6 billion in March.
"I think (exports) haven't reached a bottom yet, because the U.S. and European economies are still deep in recession," said Sherman Chan of Moody's Economy.com in Sydney.
JAPAN, AUSTRALIA
Japan's economy contracted a revised 3.8 percent in the first three months of the year, less than the initial 4.0 percent estimate but still the fastest pace since World War Two.
Economists are forecasting a gradual return to growth, although weak capital spending and personal consumption are expected to be a drag on the economy in the coming months.
"The revision was technical and doesn't change the overall picture," said Hiroshi Watanabe, senior economist at Daiwa Institute of Research. "The economy has passed the worst phase but it is unlikely to return to peak levels before the global crisis."
In Australia, a smaller-than-expected fall in employment built hopes the economy, which has so far dodged recession, will revive sooner than other developed nations. (Additional reporting by Susan Fenton in Hong Kong: Writing by Alex Richardson and Jon Boyle; Editing by Ruth Pitchford)