The global economic downturn has recently shown signs of abating, Treasury Secretary Timothy Geithner said Friday, though the glimmers of recovery are very faint.
There was enough evidence that the road to recovery from the world’s worst economic slump in six decades would be long and painful, with downbeat U.S. jobs report and other economic data, mixed company results and persistent worries about banks’ health.
Geithner, writing in the Financial Times ahead of meetings of G7 and G20 officials in Washington later on Friday, said there were signs of improvement in global markets and the world economy but that the 2009 outlook remained challenging.
"In recent weeks, there have been some encouraging signs that the global economic downturn may be slackening," he wrote. "Conditions in some financial markets have improved and the decline in world trade may be abating."
Geithner repeated Washington’s call for more policy action on behalf of the world’s leading economies to ensure lasting recovery.
The International Monetary Fund estimates that the world economy will shrink by 1.3 percent this year, in its worst recession since World War Two.
Policymakers have sought to strike a fine balance in their recent comments between inspiring confidence in their actions and preventing too much optimism from undermining public support for more spending on fiscal stimulus and company bailouts.
The latest economic data and company news offered a similarly balanced fare and markets responded accordingly, with Asian stocks vacillating between gains and losses in choppy trade after Wall Street’s 1 percent rise overnight.
Tech heavyweights Amazon.com and Microsoft as well as some smaller regional banks positively surprised markets with their earnings, while national economic bellwether United Parcel Service disappointed.
The news fed into a general sense of anxiety about the overall soundness of the financial sector ahead of the results of "stress tests" ordered by U.S. regulators to determine if banks had enough capital to withstand a deep recession.
U.S. banks including Bank of America Corp, JPMorgan Chase & Co and Wells Fargo & Co may need to raise $1 trillion of capital, Keefe, Bruyette and Woods analysts said in a report.
The process enters a critical phase on Friday, when regulators begin discussing their findings with banks, and the publication of results is due on May 4.
In a sign that not only investors, but also policymakers were nervous in the face of the worst crisis in generations, World Bank President Robert Zoellick warned nearly half of G20 nations were running foul of their own pledges to shun protectionism.
The bank’s report said the United States, Brazil, Argentina, India, Russia, France, Britain, Germany and Italy were considering or have taken measures to restrict trade.
(Reuters)
