Japan shows recovery signs, China to watch lending

By Tetsushi Kajimoto and Sakari Suoninen

TOKYO/MUNICH (Reuters) - Japan showed signs on Monday its recession may be easing and China promised more oversight of soaring lending, in contrast to the West where officials have urged banks to lend to secure economic recovery.

World stocks fell as confidence in a rapid global recovery faded and investors fretted about a coming wave of corporate earnings reports. Oil dipped briefly below $59 due to concerns that demand will tail off if the economy stutters again.

"I don't think we will see an economic recovery this year and ... earnings estimates are still too high, so there is room for disappointment," said Philippe Gijsels, senior equity strategist at Fortis Bank, in Brussels.

Evidence began emerging around late March that the global recession was starting to bottom out, driving a second-quarter rally in share markets. However, weak data in recent weeks has boosted fears that stock prices had run ahead of the prospects of a solid recovery in the second half of this year.

Japan, the world's second biggest economy, which is deep in recession, offered some hope on Monday. Industrial output rose 5.7 percent in May from April, revised data showed, and a measure of companies' capacity utilisation rose.

Japanese consumer confidence also improved in June and the government upgraded its economic assessment for a third straight month in July as private consumption gets modest support from stimulus efforts.

China seems to have few of the problems afflicting more developed economies and is more nervous about a lending boom aimed at achieving eight percent economic growth this year.

Chinese banks extended a massive 1.53 trillion yuan ($223.9 billion) in new loans in June in a fresh show of support for the government's drive to hit the growth target in 2009.