* IBM hikes full year outlook; Google results fail to shine
* JPMorgan profit tops forecasts though credit worsens
* Asian stock markets muted
* Key U.S. factory index slips, jobless claims tumble
By Jonathan Stempel and Alexei Oreskovic
NEW YORK/SAN FRANCISCO, July 17 (Reuters) - Strong earnings from U.S. corporate heavyweights JPMorgan Chase and IBM raised investors' hopes for a global recovery, despite patchy data from the world's biggest economy.
But Google's results failed to excite and there was also a note of caution from JPMorgan, which along with record investment banking and trading results reported a surge in consumer credit losses -- signalling more pain on Main Street.
"Earnings from U.S. banks have been upbeat, but there are concerns that the positive results could be limited to the second quarter," said Takahiko Murai, general manager of equities at Nozomi Securities.
"Some institutions appear to hold significant bad loans and third-quarter results may not be as encouraging."
The flurry of big bank earnings was continuing on Friday, with Bank of America and Citigroup both reporting second-quarter results later.
Asian share markets, which have risen this week on greater optimism about the corporate outlook, were muted, with Japan's Nikkei gaining 0.4 percent and MSCI's index of stocks elsewhere in the region edging up 0.1 percent.
EARNINGS BOOST
Record investment banking fees fuelled a 36 percent rise in quarterly profit for JPMorgan, topping Wall Street forecasts, though the bank warned that credit quality in consumer mortgages and credit cards was deteriorating faster than expected.
IBM reported a 13 percent fall in revenue after the stock market close, but outperformed expectations due to cost cutting and a shift to more profitable businesses.
The company sharply raised its full-year forecast as it benefited from focusing more on higher-margin businesses in software and services.
Google's quarterly profit beat expectations, but the weak economy and slump in advertising spending took a toll on revenue growth and the price of its search ads.
Shares of Google fell 3 percent after the results, which exceeded average forecasts but failed to live up to the heightened expectations of investors following Intel Corp's strong earnings earlier this week.
"They did decently, but obviously it's not high enough for the Street," said Laxmi Poruri, an analyst at Primary Global Research.
DATA PATCHY
Investors fretting over the health of the global economy received a fillip from China on Thursday, with surprisingly strong growth of 7.9 percent in the second quarter, fuelled by state spending and bank lending, reinforcing hopes it may lead the world out of its deepest recession in 80 years.
But the news from the developed world was less encouraging, with the Philadelphia Federal Reserve Bank reporting factory activity in the U.S. Mid-Atlantic region posted a worse-than-expected decline in July, contracting for the 10th consecutive month.
The Fed report showed the region's business activity index -- potentially the most closely-watched U.S. regional manufacturing reading -- dropped to minus 7.5 in July from minus 2.2 in June, below analysts' forecasts for a reading of minus 5.0.
Other U.S. data was mixed, with the U.S. Labor Department showing the number of Americans lining up for jobless benefits last week hitting the lowest level since January, although the drop was seen as distorted by upheaval in the auto industry.
"This is going to be a bumpy ride for the next six months for the economy. We are going to have volatility in the data because they are not all going to all turn at the same time," said Kurt Karl, chief U.S. economist at Swiss Re in New York. (Writing by Alex Richardson; Editing by Jan Dahinten)