Major U.S. and European companies reported lower profits on Thursday, with most saying they did not expect a quick economic recovery, while U.S. and German jobless numbers, while both higher, offered differing clues about when the recession will end.
Updates from engineering, oil, chemical and car groups revealed few signs the economy was improving and executives spoke of tough conditions with little light in sight.
But Wall Street stock prices jumped nonetheless on continuing optimism the downturn could end soon.
Exxon Mobil (XOM.N), the world's largest publicly traded oil company, reported a 66 percent drop in quarterly profit as natural gas and crude oil prices slid from a year ago and the global recession hurt demand for fuel.
It looks disappointing, said Phil Weiss, an analyst at Argus Research. They missed on margins and production.
The only conclusion you can draw from the earnings season so far is that the recovery people were expecting by the fourth quarter is looking elusive, said Philippe Gijsels, strategist at Fortis in Brussels.
German engineering company Siemens (SIEGn.DE), a bellwether for the euro zone's leading economy, suffered a steep decline in earnings and analysts predicted worse to come.
We are not banking on a quick recovery, Royal Dutch Shell Chief Executive Peter Voser said after profit at the oil group slumped 70 percent.
Analysts said the promise of an early economic rebound, which has driven a rise in global stock prices over the past four months, was beginning to fade in most sectors.
Banks burned by a credit crisis that had its roots in profligate lending have turned extra-cautious, small businesses have closed and the number of jobless continues to grow.
German unemployment unexpectedly fell in July but would have jumped if one-off effects were ignored, data showed.
Until we have a real recovery in employment there is going to be no recovery in the economy, given that 70 percent of the economy is consumer-driven, said Gijsels of the euro zone.
MIXED U.S. JOBS DATA
In the United States, jobless claims for the latest week rose slightly more than expected, but the number of workers staying on jobless rolls was the lowest in three months, and the four-week moving average for new claims, considered to be a better gauge of underlying trends, also dropped.
The headline number in the jobless claims report was slightly worse than expected, but the continuing claims component was getting better, so that bodes well for the U.S. economy going forward, said Matthew Strauss, senior currency strategist at RBC Capital in Toronto.
The data helped Wall Street to open sharply higher, along with some stronger-than-expected quarterly profits and a broker upgrade for General Electric Co (GE.N). The Dow Jones industrial average .DJI opened up more than 90 points, and by midmorning was up some 160 points or about 1.77 percent at 9,231.55.
Oil prices rose after dropping nearly 6 percent on Wednesday. U.S. light crude oil futures were up 98 cents at $64.33 per barrel in morning trade.
The euro lost gains against the dollar after an IMF report said the European Central Bank should keep euro zone interest rates low for some time. The euro eased 0.1 percent to $1.4019, after rising as risk appetite improved on firmer stock prices.
Euro zone economic sentiment improved in July, data showed, signaling the economy is bottoming out but not yet growing. Gross domestic product in the region fell 2.5 percent in the first quarter compared with the fourth quarter of 2008, and 4.9 percent year-on-year.
Europe's second-quarter earnings season gathered pace with its biggest day so far, and companies promised investors they would slash costs as they struggle to maintain dividend payouts in the face of sluggish sales.
BASF (BASF.DE), the world's biggest chemicals group, posted sharply lower profit and said that it might cut its dividend. It is a good barometer of consumer demand because it supplies a range of industries from electronics to construction.
A slump seemed to be bottoming out in North America and China was recovering but BASF said: a sustained upturn is not in sight.
Profit at carmaker Volkswagen (VOWG.DE) tumbled while rival Renault (RENA.PA) posted a net loss for the first half.
The International Air Transport Association (IATA) said it could take years for air freight -- a leading indicator for the health of world trade -- to return to 2008 levels.
There are no signs of an early economic recovery. The outlook looks bleak, it said in a statement.
Across the world, companies have managed to squeeze out profits by slashing costs, cutting jobs and closing plants.
In Japan, two second-tier automakers, Mazda (7261.T) and Mitsubishi Motors (7211.T), posted losses for a third straight quarter but kept annual forecasts unchanged, relying on cost cuts to offset weak demand.
Results from major telecom groups were among the bright spots in Europe. They reported better-than-expected first half results, helped by cost-cutting programs.
Fortis' Gijsels said cost cuts were playing a disproportionate role in company earnings.
It's all coming from cost-cutting on a low revenue base. But cost-cutting is actually adding to losses in revenue across the economy -- if you cut costs, you're cutting somebody else's revenues, he said.
Through all the uncertainty, global equities have continued to rise, driven in part by investor relief that there are signs of stabilization. Analysts also say a fear of being left behind when a recovery starts is driving a push into shares of cyclical companies.
China's central bank vowed to maintain a loose monetary policy and use market tools, not quota-style controls, to ensure sustainable credit growth to support economic recovery in a statement that analysts said was intended to calm investors.