TOPWRAP 4-Job cuts, credit worries keep recovery hopes in check

* US jobless claims jump; Wal-Mart posts flat profit

* Sony, BT see more job cuts; banks still struggling

* Spain Q1 GDP drops 1.8 percent, worst in half a century

* Japan to raise economic outlook - paper (For full crisis coverage, double click on [nCRISIS])

By Nick Zieminski and Kate Holton

NEW YORK/LONDON, May 14 (Reuters) - Major companies announced more job cuts on Thursday, more out-of-work Americans sought government help than expected, and the world's biggest retailer said it was cautiously optimistic, making clear the global economy is not yet out of the woods.

The number of U.S. workers filing new claims for jobless benefits was pushed up by auto plant shutdowns related to Chrysler's bankruptcy. Initial claims for state unemployment insurance benefits increased by 32,000, reversing the easing trend of the previous two weeks. [ID:nN14464671]

U.S. stocks were up slightly in early trading, with the Standard & Poor's 500 index <.SPX> up 0.7 percent, while European equity markets were mostly lower in late trading [ID:nLE914595]

Earlier, the worst economic figures in half a century from Spain, the euro zone's fourth biggest economy, reinforced expectations the 16-nation euro bloc will report a deepening recession in the first quarter in data to be published Friday.

Policymakers said it would take time to pull out of recession but there was evidence the worst-case outcome had been avoided thanks to official efforts to prop up economies. The European Union's top economic official, Joaquin Almunia, reminded a business forum that the economy is sending some positive signals.

"But let's be honest. Although there are signs that the recession is easing, a return to growth is not yet there," said Almunia, the EU's Economic and Monetary Affairs Commissioner.

Corporate announcements also kept stock markets subdued after Wednesday's news of a drop in U.S. retail sales raised worries that a 2-month-old rally -- based on hopes the world economy is shaking off the worst recession in decades -- might prove premature. [MKTS/GLOB]

Wal-Mart Stores Inc reported a flat quarterly profit as low prices at its discount stores attracted shoppers, but results were limited by a stronger U.S. dollar. The world's No. 1 retailer has gained market share amid the recession as shoppers head to its stores for necessities like groceries and toiletries. [ID:nN14463262]

"Our customers are still concerned about economic issues," Wal-Mart CEO Mike Duke said. "Until unemployment eases and confidence really returns, we remain cautiously optimistic about the timetable for economic recovery."

Japan's Sony Corp <6758.T> projected another year of losses and said it would close eight factories worldwide and British telecoms carrier BT announced 15,000 further job losses. [ID:nLE87055]

Belgium gave more support to KBC after writedowns pushed the banking and insurance group into a first quarter loss and sharp rises in bad debts at other European banks showed headwinds remain intense.

The second biggest lender to Europe's emerging economies, Austria's Raiffeisen International , reported a big drop in quarter profits after almost quintupling its bad debt provisions, mainly due to its exposure to Ukraine and Russia -- both big borrowers abroad during the long-running credit boom that went bust nearly two years ago.

GREENS SHOOTS IN SHADOW

Swiss central banker Thomas Jordan said the global economy is facing a deep recession followed by only a modest recovery due to the hangover from the credit binge, although worse has been averted by drastic government and central bank actions.

"Although we are not on the verge of a new Great Depression, a severe recession and a following phase of relatively low economic growth is likely to be inevitable," Jordan said in a speech on Thursday.

Spain's economy is being hit particularly hard from the collapse of a property boom and withdrawal of easy credit. Its gross domestic product shrank 1.8 percent quarter-on-quarter in the first three months of the year. An official estimate for the whole of the euro zone on Friday is expected to show a 2 percent contraction.

In Japan, government and central bank officials showed cautious optimism about the world's second largest economy, recovering from its worst recession since World War Two.

A Japanese newspaper reported the government was about to upgrade its economic assessment in May for the first time in over three years. [ID:nT309963] Bank of Japan Governor Masaaki Shirakawa earlier said the economy showed signs of life.

Policymakers who have pumped money into their economies to try to keep businesses and households spending are also still working on ways to make the world's financial system safer.

In the United States, the administration moved on Wednesday to tighten the reins on the over-the-counter derivatives trade -- estimated at about $450 trillion globally -- which allowed excessive risk-taking in the years leading up to the crisis. [ID:nN13414280] (Reporting by Reuters correspondents worldwide, Editing by Chizu Nomiyama)