A surge in Chinese manufacturing plus hopes for additional stimulus there injected a rare dose of optimism into the global economic picture on Wednesday, even though Europe's services sector fell to new lows and the United States suffered more job losses.
An important measure of Chinese manufacturing improved in February for the third month in a row and factories restocked in anticipation of economic recovery, sparking a surge in oil prices and stock markets, which had been trading at 12-year lows.
A senior Chinese economic planning official said China would increase spending in areas such as infrastructure and manufacturing on top of the 4 trillion yuan ($585 billion) stimulus package unveiled in November.
What is good for China is good for the world, said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
Stock markets around the world rallied on the data, with China's main stock index surging over 6 percent and European shares closing up 3.9 percent. The three main U.S. indexes rose around 2 percent at midday, even as shares of General Electric Co.
The Chinese data also helped buoy oil prices, which supported by weekly data showing an unexpected decline in U.S. crude stockpiles.
Economic data out of Europe and the United States was not so kind.
The Markit Eurozone Purchasing Managers Services Index showed that new business in the euro zone services sector, which accounts for the bulk of the economy, plummeted in February to a record low.
It's certainly too soon to say that the recession has reached a trough. We are going to see another sharp fall in gross domestic product this quarter, said Ben May at Capital Economics in London.
A report by ADP Employer Services showed U.S. private companies shed nearly 700,000 jobs in February, and the Institute for Supply Management said the U.S. service sector shrank further in February.
This is a slow U-shape recession, said Kurt Karl, chief U.S. economist at Swiss Re in New York. We are still sinking. There is no sign of a bottom.
The ADP report suggested that hefty employment declines are on the way in the U.S. government's more comprehensive payrolls data due out on Friday.
HELP FOR HOUSING
The ailing U.S. housing sector -- which touched off the global financial crisis when banks overexposed themselves to bad mortgage debt -- deteriorated further.
Some 8.3 million U.S. mortgage borrowers are under water, meaning they owe more to their lenders than their homes are worth, according to a report by an affiliate of a real estate services company.
The Obama administration on Wednesday launched a $75 billion mortgage modification program aimed at helping people facing imminent financial hardship stay in their homes.
Elsewhere, there were signs the poor are getting poorer. The International Monetary Fund warned late on Tuesday the global financial crisis had shifted to the world's poorest nations and 22 might need as much as $25 billion in additional funds this year to cope with the downturn.
British Prime Minister Gordon Brown implored the United States to lead the world out of recession, telling a joint session of the U.S. Congress to resist protectionism and take advantage of international goodwill toward America after the election of President Barack Obama.
You now have the most pro-American European leadership in living memory. A leadership that wants to cooperate more closely together, in order to cooperate more closely with you, Brown said. There is no old Europe, no new Europe, there is only your friend Europe.
(Reporting by Reuters bureaus worldwide; Editing by Leslie Adler)