Major companies announced more job cuts and losses on Thursday, adding weight to a downbeat report on U.S. consumers and making clear the global economy is not yet out of the woods.
The worst economic figures in half a century from Spain, the euro zone's fourth biggest economy, reinforced expectations the 16-nation euro bloc will report a deepening recession during the first quarter in data to be published on Friday.
Policymakers said it would take time to pull out of recession but there was evidence the worst case outcome had been avoided thanks to official efforts to prop up economies.
The European Union's top economic official, Joaquin Almunia, reminded a business forum that the economy is sending some positive signals.
"But let's be honest. Although there are signs that the recession is easing, a return to growth is not yet there," said Almunia, the EU's Economic and Monetary Affairs Commissioner.
Corporate announcements kept stock markets subdued on Thursday after Wednesday's news of a drop in U.S. retail sales raised worries that a 2-month-old rally — based on hopes the world economy is shaking off the worst recession in decades — might prove premature.
The latest figures on U.S. jobless claims, due at 1230 GMT, are expected to underscore the still fragile state of the U.S. economy, while the world's biggest retailer Wal-Mart is expected to report higher first quarter sales because shoppers are drawn to its low prices on food and other necessities.
Japan's Sony Corp projected another year of losses and said it would close eight factories worldwide and British telecoms carrier BT announced 15,000 further job losses.
Belgium gave more support to banking and insurance group KBC after writedowns pushed it into a first quarter loss and sharp rises in bad debts at other European banks showed headwinds remain intense.
The second biggest lender to Europe emerging economies, Austria's Raiffeisen International, reported a big drop in quarter profits after almost quintupling its bad debt provisions, mainly due to its exposure to Ukraine and Russia — both big borrowers abroad during the long-running credit boom that went bust nearly two years ago.
GREENS SHOOTS UNDER SHADOW
Swiss central banker Thomas Jordan said the global economy is facing a deep recession followed by only a modest recovery due to the hangover from the credit binge, although worse has been averted by drastic government and central bank actions.
"Although we are not on the verge of a new Great Depression, a severe recession and a following phase of relatively low economic growth is likely to be inevitable," Jordan said in a speech on Thursday.
"History shows that an economy only returns to a sustainable growth path after a real estate and financial market crisis once the bad loans are written off and the banking system has been recapitalised," he said.
Spain's economy is suffering particularly hard from the collapse of a property boom and withdrawal of easy credit. Its gross domestic product shrank 1.8 percent quarter-on-quarter in the first quarter. An official estimate for the whole of the euro zone on Friday is expected to show a 2 percent contraction.
In Japan, government and central bank officials showed cautious optimism about the world's second largest economy recovering from its worst recession since World War Two.
Bank of Japan Governor Masaaki Shirakawa said on Wednesday the economy showed some signs of life, while a Japanese newspaper reported on Thursday that the government was about to upgrade its economic assessment in May for the first time in over three years.
Policymakers who have pumped money into their economies to try to keep businesses and households spending are also still working on ways to make the world's financial system safer.
In the United States, the administration moved on Wednesday to tighten the reins on the over-the-counter derivatives trade — estimated at about $450 trillion globally — which allowed excessive risk-taking in the years leading up to the crisis.
