The Bank of Japan forecast on Tuesday that the world's second largest economy may stop shrinking later this year, and investors signalled that recession in Germany was nearing its low point.
Data from the U.S. housing market, where the global financial crisis was born, showed construction of new homes rebounded in May. But analysts said the figures had yet to signal conclusively that any recovery was on the way.
Japan's central bank sounded slightly more optimistic after keeping interest rates unchanged, although its outlook was hedged with caution.
A ZEW survey of investors and analysts in Germany, Europe's dominant economy, was stronger than expected, although that optimism has yet to filter into the real world, where companies are struggling and workers are losing their jobs.
"The survey gives the impression that we could be looking at normal economic activity again by the end of the year. We do not see things this way," said Rainer Sartoris, an economist at HSBC Trinkaus. "Survey participants are somewhat removed from the real situation, which is still very bad."
Investors are seeking any sign that the worst of the global recession may be over, despite appeals for caution from officials who fear that markets will surge, only to dive again if the real economy fails to revive.
Surveys, many of which reflect people's mood rather than economic facts, have often proved more robust than hard data.
SCARCE OPTIMSIM
In the real economy optimism remains scarce. Data on Tuesday showed that new car registrations fell in Europe for a 13th straight month in May as many companies struggled to sell vehicles without cash incentives from governments.
French newspapers also reported that tyre giant Michelin would cut 1,500 jobs in the country.
New U.S. housing starts and permits rebounded in May from record lows as ground-breaking for multifamily units surged after tumbling in April, the government reported.
A collapse in U.S. home prices and a consequent jump in mortgage defaults brought U.S. banks to their knees last year, and Tuesday's data showed the market is not out of the woods.
"It's a sign that housing is stabilising, but it's too early to say that we've seen the bottom," said Gary Thayer of Wells Fargo Advisors in St Louis, Missouri. "We'd probably need to see several months of stronger sales and better housing starts to give a convincing signal that we're going to see a housing recovery."
In Tokyo, the Bank of Japan held its main rate at 0.1 percent and upgraded its economic assessment, as rising output and exports raise hopes the worst is over.
But its tone was cautious. The BOJ said the economy was likely to show clearer evidence of levelling out in the next few months. Domestic demand remained weak as companies pass on their financial pain to households through job cuts, it added.
"The BOJ is still maintaining a very pessimistic view on the economy," said Junko Nishioka, chief economist at RBS Securities in Tokyo. "It said the economy has begun to stop worsening, but it didn't say it has stopped worsening."
In Germany, analyst and investor sentiment rose in June to its highest level since May 2006, the survey from the Mannheim-based ZEW economic think tank showed.
"We are nearing (the lowest point in the recession)," ZEW economist Peter Westerheide said. "It all points to an improvement in economic growth. We might still see negative growth digits (in the fourth quarter) but it will be an improvement compared to what we have seen in the past."
RUSSIAN REMARKS
Despite these glimmers of hope markets had a bumpy ride, helped by Russian President Dmitry Medvedev who said the world needed new reserve currencies. "We have to consolidate the international monetary system, not only through the consolidation of the dollar but the creation of new reserve currencies," he said in the Urals city of Yekaterinburg.
Markets react nervously to any questioning of the dollar's global dominance and the U.S. currency fell broadly.
However, the Kremlin's top economic aide said Russia would advocate a cautious approach to changing the system of global reserve currencies at the first formal summit of the world's biggest emerging economies in Yekaterinburg.
Brazil, Russia, India and China — which account for 15 percent of the $60.7 trillion global economy — will focus on ways to reshape the financial system after the economic crisis.
"There is an understanding that the last thing we need now is turmoil on financial markets," economic aide Arkady Dvorkovich told a news briefing. "No one wants to ruin the dollar, including us."
STUBBORN INFLATION
In Britain, inflation slowed much less than expected in May to remain above the Bank of England's 2.0 percent target for a 20th consecutive month, data showed.
U.S. stock index futures extended gains after the housing data and a report that producer prices rose less than expected in May, showing inflationary pressures were contained.
Asian stock markets fell on Tuesday, with Japan's Nikkei down 2.9 percent for its worst one-day percentage loss in more than two months.
European shares inched higher, as energy and defensive stock gains offset bank losses after a planned rights issue by National Bank of Greece revived fears over banks' balance sheets.
