* European auto results disappoint, paint bleak outlook

* World shares price in recovery, near 2009 highs

* Bernanke: Fed has tools to tighten policy when needed

* UK public finances register worst June on record

(For more on the financial crisis, click on [nCRISIS])

Auto companies posted steep losses and poor outlooks for the industry on Tuesday, suggesting recovery is some way off despite improving economic data and a stock market rally toward nine-month highs.

Share prices have taken succour from a sense of healing in the banking sector and prompted talk of how and when central banks might remove unprecedented stimulus measures introduced as the financial crisis erupted last summer.

Central banks have poured trillions of dollars into the global banking system to spur lending, but the question of how governments will cover their growing debts remain.

Stressing that the weak U.S. economy would probably need easy monetary policy for some time to come, U.S. Federal Reserve chairman Ben Bernanke said in a newspaper opinion piece the Fed could raise borrowing costs even with cash flooding the financial system. [ID:nHKG104311]

Accommodative policies will likely be warranted for an extended period, Bernanke wrote in an article published on the Wall Street Journal's website ahead of his testimony before Congress later on Tuesday.

But while exuberance in anticipating the timing of recovery dominated market sentiment, second-quarter results from Volvo (VOLVb.ST), the world's second-biggest truckmaker, and French car parts manufacturer Faurecia (EPED.PA) painted a bleak picture. [ID:nLL21535]

Having posted a deeper-than-expected operating loss of 6.9 billion crowns ($897 million) down from a 7.2 billion profit a year ago, Volvo stood by its forecast that the economic downturn would see its main, recession-hit U.S. and European markets shrivel this year.

But in contrast to others in the sector, Volvo succeeded in cutting inventories as it adjusted to dwindling demand, significantly slowing spending.

I think that market expectations were for a much more negative cash flow, Handelsbanken analyst Hampus Engellau said. STUMBLING FOR THE EXIT

While the Fed has said it has plenty of tools to push borrowing costs up when the U.S. economy recovers, the complication of an exit strategy came into sharp focus in Britain.

Crumbling tax revenues propelled Britain's budget deficit to a record high for the month in June, putting the government under further pressure to spell out a credible debt-reduction strategy. [ID:nLL444821]

Data showed the public sector posted a net cash requirement of just under 19 billion pounds ($31 billion) last month, slightly lower than analysts had forecast but the worst reading since records began in 1984. Public sector net borrowing came in at just over 13 billion pounds.

The deterioration took public sector net debt to 56.6 percent of GDP, the highest since records began in 1974.

June's public finance figures do absolutely nothing to alter the big picture that they are in a dreadful state, said Vicky Redwood at Capital Economics.

By contrast, minutes from the Reserve Bank of Australia's meeting earlier this month showed the central bank had grown more optimistic on the economic outlook. [ID:nSYD462979]

The bank left interest rates unchanged at a record low level but said it still saw scope for further easing if necessary.

The minutes also showed the bank believed monetary and fiscal stimulus had worked to support household demand and confidence, and credited strong demand from China for keeping Australia's commodity-focused exports surprisingly strong.

Demand from China, spurred by a $585 billion stimulus package, has proved a boon for companies across Asia as major Western economies contracted, helping stock markets in the region out-perform their European and U.S. rivals.

MSCI's measure of Asia-Pacific stocks outside of Japan .MIAPJ0000PUS rose 0.3 percent on Tuesday, up for a sixth day running and hitting its highest level since September.

The index has gained almost 40 percent this year, compared with a 12 percent rise in MSCI's All Country World index .MIWD00000PUS. (Additional reporting by Reuters reporters worldwide; Writing by Veronica Brown; Editing by Dan Lalor) ($1 = 7.692 Swedish crowns = 0.6100 pound)