* Rio yet to see light in commodities markets

* CEO Walsh says forecasting a recovery "brave call"

* Rio not actively on M&A trail (Recasts, adds comments from CEO Walsh, other details)

By James Regan and Sonali Paul

SYDNEY/MELBOURNE, May 5 (Reuters) - Mining giant Rio Tinto is not counting on an upturn in commodities markets anytime soon despite recent gains in prices of iron ore, its main source of revenue, as much of the world's economies continue to underperform.

Chief Executive Sam Walsh said factors such as the looming U.S. election, a softer outlook in China and immigration woes facing Europe were suppressing a recovery in commodities. His view, however, is a departure from others calling for an end soon to the commodities rout that has sent just about every major mining company into the red.

"I believe in that environment, calling the bottom is a brave move," Chief Executive Sam Walsh told reporters.

Walsh, who will be replaced by Jean-Sebastien Jacques as CEO in early July, also doused speculation that Rio Tinto was coiled to pounce on assets put on the block by rivals suffering more from the downturn. "There are just simply not assets that we might be interested in," he said on Thursday.

The 143-year-old company has typically avoided the oil business and has also made it clear its days of expanding in iron ore are coming to a close.

Rio Tinto has been cited as an interested party if Freeport McMoran's Grasberg copper mine becomes available.

"I'm not holding my breath and I suspect that JS won't hold his breath unless somebody puts their crown jewels on the table, and my instinct is that'll be the last thing they do," Walsh said, referring to the incoming CEO.

The operating environment remains "tough out there" with heightened volatility in markets, made worse by widespread speculative trading in metals futures in China, Walsh told reporters after Rio Tinto's annual general meeting in Australia.

He added that Rio Tinto was looking to eliminate a further $2 billion in costs over the next two years.

Iron ore prices are up about 43 percent this year, after falling by close to 40 percent in 2015.

Nev Power, the CEO of Australian iron ore miner Fortescue Metals Group, is betting on prices stabilising in the months ahead as supply and demand come into balance.

Rio Tinto, which runs the world's No.2 iron ore business and is also a force in aluminium, copper, coal and dozens more commodities, has run into troubled waters with the toughest mining downturn in decades. It slumped to a net loss in 2015.

(Editing by Himani Sarkar)