* Source-IMF lifts 2010 global growth forecast
* China investment surges, adding to recovery hopes
* Japan Q1 GDP record low, slow rebound seen
* U.S. jobless claims fall, retail sales up
* Mounting deficits feed worries about U.S. economy
By Jason Subler and Jon Boyle
LONDON/BEIJING, June 11 (Reuters) - The International Monetary Fund has revised its 2010 growth forecast sharply upwards, a source said on Thursday, and surging Chinese investment in May fuelled hopes of a global recovery.
The IMF has raised global growth estimates for 2010 to 2.4 percent from 1.9 percent in April, a G8 source who has seen the latest figures said on condition of anonymity.
"The estimate has improved thanks to the impact of stimulus measures taken in recent months," said the source, who had access to an IMF briefing note, containing the figures, prepared for finance ministers from the Group of Eight industrial powers who are meeting in Italy this weekend.
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.
However, financial markets remain concerned that huge government spending and central bank cash injections, led by the United States but mirrored in Europe and Japan, will spark inflation and undercut any nascent rebound.
A record slump in Japan's first quarter GDP nevertheless reinforced expectations that any rebound would be slow, 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."
In signs of revival in the world's largest economy, U.S. May retail sales rose 0.5 percent, in line with forecasts, compared to a 0.2 percent drop in April, and jobless claims also fell in the latest week, official data showed.
Markets also awaited 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 its non-standard steps to ease credit would take time to feed through to the real economy. But Asmussen said the G8 finance ministers would discuss "credible exit strategies" from the crisis 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
JAPAN CONTRACTS
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'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.
Weak capital spending and personal consumption are expected to remain a drag. "The economy has passed the worst phase but it is unlikely to return to peak levels before the global crisis," said Hiroshi Watanabe, senior economist at Daiwa Institute of Research. (Additional reporting by Susan Fenton in Hong Kong: Writing by Alex Richardson and Jon Boyle; Editing by Ruth Pitchford)