Berlin - Japan's exit from recession on Monday might have added to hopes that the dramatic global economic slump that took hold last year is drawing to a close.

But a sell-off of shares around the world Monday underscored concerns about the shape and scale of the recovery amid worries that economic optimism, which helped to power stock markets in recent months, might have been overdone.

"The recovery is not running on all cylinders," said Rainer Guntermann, European economist with the investment house Dresdner Kleinwort.

Japan might have joined Germany and France to haul itself out of the biggest economic slide in decades.

However, economists remain divided on whether the world economy now faced a quick rebound in a V-shaped recovery or maybe a mini-V or possibly a more subdued U-shaped recovery.

Others believe it could be even more of a www. www. www recovery, where growth finally gains traction after a series of false starts. Apart from an acceleration in exports and low global interest rates, the batch of positive second-quarter growth figures have been underpinned by massive government fiscal stimulus packages.

This has included generous state subsidies to encourage car owners to scrap their old vehicles and to trade up to models with strong environmental features.

But one question facing economists as they try to size up the world economic performance in the coming months is: what happens when the money provided under the stimulus packages runs out?

Some believe the global economy might fail to gain a sure footing and slump back into recession.

Certainly investors reacted cautiously to the news that the Japanese economy grew by 0.9 per cent in the three months to the end of June marking down stocks in markets from Asia through to Europe and the US.

While Tokyo's benchmark Nikkei 225 Stock Average plunged 3.1 per cent following the release of the GDP figures, the often volatile Shanghai Composite index tumbled by a sharp 5.8 per cent on Monday.

The sell-off across Asia rolled into Europe Monday with European stocks extending losses run up earlier in the day after Wall Street stumbled at the opening of its trading day.

As European trading came to a close on Monday, Europe's blue-chip Stoxx 50 index was down by more than 2 per cent after New York posted a 1.9 per cent drop in the first few minutes after the start of trading.

Indeed, shares had started to turn down by the end of the week, despite last Thursday's surprise announcements that German and French economic growth rates both came in at a stronger-than-forecast 0.3 per cent in the second quarter.

Moreover, Japan's return to an economic growth path during the second quarter fell short of economists' projections, which also helped to temper hopes that the global economy had finally turned the corner after being ravaged for months by recession.

In the meantime, the US, the world's biggest economy, is still mired in recession, shrinking by 1 per cent in the second quarter after contracting by 6.4 per cent in the first three months of 2009.

Either way, the news that three leading industrialized nations have hauled themselves out of recession marks a change from six months ago when analysts were painting gloomy scenarios for the global economic system as the recession tightened its grip.

Asia's key emerging economies have also chalked up solid second- quarter growth rates with China's second-quarter GDP rebounding to 7.9 per cent powered by a generous government stimulus plan.

China's economy slowed to 6.1 per cent in the first three months of the year. But apart from the end of the government fiscal packages, key hard economic data has also been patchy as has the latest quarterly company reporting season.

Also overhanging the hopes of a recovery is the threat posed to national household spending by rising unemployment as well as possibly a prolonged period of negative inflation rates in parts of the world.

"While the worst is clearly over, the upswing is likely to be fragile," said Julian Jessop, chief international economist with Capital Economics research group.

That said, however, signs that the world economy might have snapped the back of recession have sent economists scurrying to revise up their economic forecasts with French and German growth expected to pull Europe back onto a growth track during the second half of the year.

Instead of a previously predicted grim 6 per cent plus contraction, many economists now believe that Europe's biggest economy, Germany could shrink by less than 5 per cent this year before expanding by about 1 per cent or more in 2010.

Similarly, Japan, which has been one of the worst hit by the economic crisis, is projected to swing back to a positive growth rate next year of 1 per cent plus, having slumped by about 6 per cent this year.

The giant US economy is also expected to glide back to a growth rate of about 2 per cent in 2009 following a contraction of more than 2 per cent this year.(dpa)