U.S. lender CIT Group Inc has reached a tentative deal with bondholders for $3 billion in rescue financing, sources said, as it tries to avoid becoming the latest casualty of the global crisis.
Asian stocks rose to their highest since around the time of the collapse of Lehman Bros in September, boosted by news of the CIT refinancing plan and hopes of a recovery in corporate earnings in the months ahead.
European stocks were also set for a firmer open and headed for their sixth straight day of gains.
Record low global interest rates and trillions of dollars in stimulus spending appear to be helping the world recover from the worst recession in 80 years.
Second-quarter U.S. gross domestic product figures are likely to be better than the first quarter, showing some signs of improvements in the economy, White House Budget Director Peter Orszag said on Sunday.
A survey of economists released on Monday suggested the U.S. recession was easing but had probably not yet ended.
"Industry demand was still declining in the second quarter of 2009, but the breadth of decline had narrowed considerably since late 2008, raising prospects for stabilisation in the second half," said Sara Johnson, managing director of global macroeconomics for IHS Global Insight, who helped analyse the report for the NABE.
But more state money may yet be required to get the global economy back on its feet, with the German government considering a U.S. style bank rescue plan that would use public funds to recapitalize banks, a German newspaper reported on Sunday.
Australia's trade union movement on Monday called for the government to ready another round of economic stimulus spending to stave off a predicted surge in joblessness.
CHINA WARNING
China has committed to spend around $585 billion in stimulus spending and has encouraged its banks to lend more freely to support the economic growth it needs to create jobs and ensure the stability so craved by Beijing.
However, the country's top banking regulator on Sunday warned of the risks from surging bank lending, singling out the dangers of unhealthy growth in the property market.
Liu Mingkang, the head of the China Banking Regulatory Commission, said bank lending had helped stabilize the economy so far but made one of his strongest calls yet to banks to guard against taking excessive risks.
"In the first half of the year, our country's banking loans expanded rapidly and helped play an important role in stabilizing the economy, but the loans growth has led to accumulated risks also increasing," he was quoted as saying in a statement on the China Banking Regulatory Commission website (www.cbrc.gov.cn). The U.S. government has also committed to spending hundreds of billions in stimulus and has bailed out financial institutions including insurance giant AIG, but talks over a Washington rescue of CIT collapsed last week, leaving it to strike a rescue deal with its bondholders.
The board of CIT, which lends to nearly one million small and mid-sized businesses, approved a $3 billion deal with bondholders late on Sunday, a source close to the matter said.
An announcement was expected before U.S. markets open on Monday.
ASIAN SHARES RISE
Asian shares climbed to their highest since September last year on Monday, helped by the CIT news, while both the dollar and the yen fell as risk appetite rose.
MSCI's measure of Asia-Pacific stocks outside Japan rose 2.2 percent, on track for a fifth consecutive session of gains and taking its year-to-date advance to more than 36 percent.
Japan's markets were shut for a public holiday, keeping trading volumes relatively low.
Much will now depend on the U.S. second-quarter earnings season, which powers up this week with more than a quarter of the companies in the Standard & Poor's 500 Index reporting earnings, including Texas Instruments on Tuesday.
Investors will turn their attention later in the week to household names such as American Express Co, Apple Inc, Boeing Co, Coca-Cola Co, McDonald's Corp and Microsoft Corp to see what the earnings of these dominant corporations say about the U.S.
