* World bank head sees return to growth end 2009 or 2010
* Moody's cuts Japan's AAA foreign rating, ups local debt
* Japan manufacturing, consumer sentiment edge up
* Asian, European stock markets gain, Indian shares soar
By Karolina Slowikowska
WARSAW, May 18 (Reuters) - The global economy may return to growth in late 2009 or in 2010, World Bank President Robert Zoellick said on Monday, and European banking officials also saw tentative signs the financial crisis could be easing. In Asia, credit rating agency Moody's stripped Japan of its AAA rating on its foreign currency debt, but manufacturing and consumer sentiment edged up, keeping alive hopes the storm hitting the world's No 2 economy might be abating.
European stock markets followed Asia higher and Wall Street was forecast to rise, too, following better-than-expected earnings from U.S. home improvement chain Lowe's.
The standout market was India where the 30-share BSE index jumped more than 17 percent, the biggest single-day gain in almost two decades, after the ruling coalition secured a decisive election victory.
Zoellick, speaking during a trip to Warsaw, said the pace of decline in the global economy was set to slow.
"The question is when we will return to growth in the global system and that could be late 2009 or 2010. I don't think this will be 2011," he said.
Last week, Zoellick stressed the high degree of uncertainty still colouring the outlook for the global economy.
Once-booming Central and eastern Europe have been particularly hard hit by investors fleeing riskier emerging markets. The crisis could have an impact on short-term foreign direct investment in the emerging world, Zoellick said.
Many economists and policymakers are cautiously optimistic that sharp interest rate cuts, fiscal packages and bank bailouts will eventually succeed and that the world has probably seen the worst of the deepest recession since World War Two.
European Central Bank policymaker Axel Weber said he believed the bank's efforts to boost the eurozone economy were sufficient.
"Unless things get noticeably worse, in my view, the package of measures decided until now is sufficient," Weber, who also heads Germany's Bundesbank, told the Financial Times Deutschland.
The euro zone's trade balance swung into a surplus in March from deficits the previous month and a year earlier as exports dipped marginally more slowly than imports, data showed.
The unadjusted external trade surplus of the 16 countries using the euro came to 400 million euros ($541.7 million) against deficits of 1 billion euros in February and 2.3 billion in March 2008, the European Union's statistics office said.
Adjusted for seasonal swings, the euro zone still had a 2.1 billion euro trade deficit in March, but that gap was smaller than February's 2.9 billion euros and January's 6.6 billion shortfall.
Another ECB council member, George Provopoulos, said it would take time before economies recover and return to robust growth, despite the positive signs.
"Those so called 'green shoots' suggest the economy may be stabilising," Provopoulos said in a speech to the Organisation for Security and Cooperation in Europe.
"It is important to keep in mind, however, that if stabilisation is indeed taking place, it is at a very low level of activity. It will take some time before our economies fully recover and grow at a robust pace."
Weber also said the rate of Germany's economic decline would slow in coming months but it was too early to speak of recovery.
JAPAN RATING CUT
Moody's combined its cut in Japan's largely symbolic foreign currency rating with an upgrade by a notch to domestic government bonds. Unlike many of its peers in the top triple-A category, the world's No.2 economy relies mainly on domestic funding.
Japanese Finance Minister Kaoru Yosano said the rating hike on domestic government bonds reflected the Japanese market's ability to absorb greater issuance of such paper.
Moody's said the move would unify Japanese government debt at a new Aa2 level. It coincided with a survey of Japanese manufacturers that showed sentiment edging up from record lows.
As governments from Beijing to Washington have committed trillions of dollars to kickstart their economies, growing debt and deficits have raised questions whether nations such as United States or Britain can keep their top credit grades.
"The move to lower Japan's foreign currency bond rating from Aaa opens the way for speculation about whether Moody's will take similar actions on other triple-A ratings," said Kenro Kawano, senior rates strategist at Credit Suisse in Tokyo.
A separate government poll of Japanese households also showed consumer sentiment improved in April, though most consumers remained pessimistic.
Those tentative signs of life came against a backdrop of deeper-than-feared first-quarter declines in the United States and euro zone economies and signs that companies around the world are still struggling with a slump in trade and demand.
Japan, its fortunes inseparable from its export markets, is expected to report its economy contracted 4.2 percent in the first quarter when it releases its gross domestic product data on Wednesday. ($1=94.80 Yen) (Reporting by Reuters correspondents worldwide; Writing by Angus MacSwan; editing by Malcolm Davidson)