Australia's central bank kept interest rates unchanged on Tuesday after data showed improvements in the country's export and housing sectors, further fuelling hopes for a global economic recovery that have driven stock markets to seven month highs.
Signs that massive stimulus efforts by policymakers around the world are starting to have some impact will be a relief for governments that have racked up huge deficits to pay for them.
In China, U.S. Treasury Secretary Timothy Geithner said U.S. efforts to prime its ailing economy had received a vote of confidence from Beijing, which understood why higher budget deficits were needed.
"I've actually found a lot of confidence here in China, justifiable confidence, in the strength and resilience and dynamism of the American economy and I think a very sophisticated understanding…of the steps we're taking and why they're so important, not just to the United States but to China and the rest of the world," Geithner told China state television on the second day of a two-day visit.
Investors are also showing signs of confidence that the worst of the crisis spawned by the collapse of the U.S. home lending market may have passed.
Global stocks advanced to the highest level since October 2008 on Monday as Wall Street's main indexes jumped by 2.5-3 percent on the back of stronger-than-expected manufacturing numbers..
Asian stocks followed suit on Tuesday, with Japan's Nikkei up 1 percent and stocks elsewhere in the Asia-Pacific up a similar amount.
Commodities were also strong as the economic data suggested the world was pulling out of recession, with oil holding above $68 a barrel and copper above $5,000 a tonne.
AUSSIE RATES HELD
Australia's net exports, skewed towards commodities such as coal and iron ore, contributed a much larger-than-expected 2.2 percentage points to gross domestic product in the first quarter, according to data on Tuesday.
That raised the odds that Australia dodged a recession last quarter and suggested interest rates there could bottom well above those of other developed nations.
The Reserve Bank of Australia left rates unchanged at 3 percent, saying evidence continued to emerge that the global economy was stabilising, helped by stimulus packages and better conditions in financial markets.
But the bank said it had room to further cut rates if needed, dampening some expectations that its easing cycle was over.
"After this morning's data, some quarters in the market thought the RBA may drop its easing bias, but the easing bias is still in place," said Peter Jolly, head of research at National Australia Bank.
"It's sensible that the RBA is cautious. The (global) economy is in its worse recession in 60 years and it would take more than a couple of green shoots to get us out of the woods."
Economic data from around the world remained patchy.
South Korea's foreign exchange reserves had their biggest monthly rise ever in May, central bank data showed on Tuesday, and Japanese Finance Minister Kaoru Yosano said Japan's economy had hit a bottom, though a full recovery may not come until early next year.
Data due later on Tuesday is expected to show that unemployment in the euro zone rose to 9.1 percent in April, while U.S. auto sales are seen languishing in May ahead of bankruptcy filings by Chrysler and General Motors
GM filed for the third-largest bankruptcy in U.S. history on Monday, with the U.S. government pledging a further $30 billion in additional funds to try and restructure and revive the No.1 U.S. automaker.
