German economic sentiment jumped on Tuesday, a clutch of central bankers detected signs of stabilisation ahead and retail giant Tesco shrugged off global malaise to post bumper profits.
Recent improvement in some economic data and company results had propelled stocks on a six-week rally until Monday, when spiralling credit losses at Bank of America brought the market grinding to a halt.
Debate is raging as to whether the worst economic downturn in 80 years has found a floor and, in parallel, whether stock markets have embarked on a sustained rally or are merely bucking a broader bear market for a short while.
The ZEW think tank's April poll of German economic sentiment rose to 13.0 from -3.5 in March, the first time since July 2007 that the index has hit positive territory.
"There are some glimmers of hope … The deterioration of the real economy is slowing down and mixed signals from confidence indicators show that at least confidence is trying to find a bottom," said Carsten Brzeski at ING Financial Markets.
World credit first seized up in mid-2007 as banks suffered huge losses stemming from a collapsing U.S. home loan market. That crunch has led to deep recession in much of the world.
Supermarket group Tesco, the world's number three retailer, posted a 10 percent rise in underlying annual profit to 3.13 billion pounds ($4.6 billion), a record for a British retailer, and said it had made a good start to its 2009-10 year.
"It looks as if the consumer is stabilising at least, so you're not seeing the situation worsening," Chief Executive Terry Leahy said in a telephone interview. "(But) I think it's too early to forecast when an upturn will come."
C.BANKERS SEE STABILISATION
A clutch of central bankers also noted signs of stabilisation ahead.
European Central Bank Governing Council Member Christian Noyer said there were some signs the economy had become "less bad" in recent weeks.
"We have good reasons for thinking that we could have an economy that will stabilise at the end of the year and a recovery in 2010," he told France's RTL radio.
UK rate setter Andrew Sentance said data since February supported the Bank of England's scenario of a modest recovery in late 2009 and a stronger rebound in 2010.
And the Federal Reserve's number two official said late on Monday a modest U.S. recovery could set in later this year.
Recent developments "may be an early indication that conditions are falling into place for real gross domestic product to decline at a slower rate in the second quarter and to stabilise later this year," Fed Vice Chairman Donald Kohn said.
GLACIAL PROGRESS
Trillions of dollars committed to stimulus packages, cautious optimism about corporate earnings and data suggesting the free-fall in global economic activity was slowing have buoyed world stocks by nearly a third since early March.
But nobody is forecasting a rapid recovery and Bank of America's results showed the banking sector remains troubled.
Bank of New York Mellon Corp said on Tuesday first-quarter profit fell by more than half, and it cut its dividend 63 percent in an effort to build capital.
European shares dropped 0.5 percent following Monday's tumble and U.S. stock futures pointed to a slightly lower start on Wall Street.
Japan said it would issue bonds worth 10.82 trillion yen ($110 billion) to fund its planned $150 billion stimulus package to tackle its deepest recession since World War Two.
But the government is set to cut its forecast for the fiscal year to March to a 3 percent contraction, Japanese media said, from a previous forecast for flat growth.
The damage to major economies and their public finances will also be laid bare by Britain's annual budget on Wednesday.
British finance minister Alistair Darling is expected to pencil in a 3-3.5 percent contraction this year and ramp up public borrowing to at least 160 billion pounds.
Latest UK data on Tuesday showed consumer inflation dropped to 2.9 percent in March and the broader retail price inflation measure fell to -0.4 percent year-on-year, the first negative annual reading since March 1960.
Australia's economy, too, looks to be contracting, with the central bank governor saying all information pointed to a first recession since 1991.
Sweden cut interest rates to a record low 0.5 percent on Tuesday, to fight its worst recession since the 1940s.
"The outcomes and confidence indicators published in recent months point to the economic downturn being even deeper than the Riksbank had forecast in February," Sweden's central bank said in a statement.
