For more discussion about the direction of stock markets, also see my recent posts Video-O-Rama: Stress Tests Ad Nauseum, Gold Bullion: Regaining Its Shine?, Jeremy Grantham: The Last Hurrah and Seven Lean Years, Parting Thoughts from David Rosenberg, Technical Talk: Stellar Market Internals and Picture Du Jour: Stock Markets - It’s All About Confidence. (And also make a point of listening to Donald Coxe’s webcast of May 8, which can be accessed from the sidebar of the Investment Postcards site.)

Economy

“Global business confidence has taken on a brighter hue in recent weeks. Sentiment notably improved in the US last week to its best level since early November. Expectations regarding the outlook 6 months from now -- a good leading indicator -- have risen meaningfully since hitting a record low at the very end of last year,” said the latest Survey of Business Confidence of the World conducted by Moody’s Economy.com.



Further to the official Chinese Purchasing Managers Index (PMI) reported on last week, the CLSA China Manufacturing PMI also increased strongly to 50.1 in April from 44.8 in March - any reading over 50 indicates that the manufacturing sector is growing. “China's government has been extremely successful in stimulating investment and, combined with a sharp improvement in export orders, this has pushed the PMI back into positive territory,” wrote CLSA's head of economic research, Eric Fishwick.



Rebecca Wilder (News N Economics) summarized the global economic picture as follows:

“The signs of hope remain mostly in the soft data -- US and China Purchasing Managers surveys posting consecutive monthly growth - while the hard data -- export growth, inflation, and unemployment -- continue to deteriorate. Going forward, the story that ‘economies are declining less quickly’ is gaining some momentum. And for some, a turning point may be on the horizon.”

In an article entitled Green Shoots or Dandelion Weeds, John Mauldin (Thoughts from the Frontline) said:

“So many bullish analysts talk about the second derivative of growth, by which they mean that we are slowing our descent into recession. But it is not the second derivative that is important. What is important is that the first derivative, actual growth, return. Until that time, unemployment will continue to rise, which is going to put pressure on incomes and consumer spending, and thus corporate profits.”

Testimony that the coast is not yet clear came from the European Central Bank (ECB), cutting its main interest rate by 25 basis points to a record low of 1%, and announcing plans to buy €60 billion of covered bonds (backed by mortgage or public sector loans). Across the Channel, the Bank of England (BoE) kept rates at 0.5% and said it would pump a further £50 billion into the UK economy by means of “quantitative easing.”