China's economy is headed in the right direction but the foundations of the recovery are not yet solid, a Chinese central bank official said on Tuesday, adding to a chorus of voices cautioning against expectations of a rapid rebound from the global crisis.
The world economy is struggling to overcome problems stemming from last year's housing and financial market meltdown, with access to credit still tight, companies reluctant to spend and job losses mounting.
The U.S. unemployment rate, at 9.4 percent already its highest in about 25 years, is likely to hit 10 percent in the next couple of months, a White House spokesman said on Monday.
U.S. President Barack Obama will likely discuss his plans to create jobs and stem unemployment when he gives his fourth White House press conference since taking office later on Tuesday.
Around the world, governments and central banks have been cutting interest rates to record lows, buying financial assets and building infrastructure to prop up growth and encourage consumers to spend.
German consumer sentiment is poised to rise to a one-year high in July, according to the GfK market research group, but analysts cautioned of more pain to come.
Consumption is preventing the economic downturn from becoming more acute, said Klaus Schruefer, an economist at SEB Bank. But over the medium-term the outlook is not so good: the financial crisis has yet to reach most people and the companies are still holding back from laying people off.
Su Ning, a vice-governor of the People's Bank of China, said he hoped China would be among the first economies to recover from the crisis.
The overall situation is stabilising and moving in the right direction, Su said at a conference on Tuesday.
But he cautioned that the pick-up was still not firmly anchored and expressed particular concern about the grim international environment for Chinese exporters as the financial crisis continues to take a toll on global growth.
China's annual economic gross domestic product growth for the second quarter would probably accelerate to close to 8 percent from 6.1 percent in the first three months, a government statistician said in a separate report on Tuesday.
Both the World Bank and the Organization for Economic Co-operation and Development offered dispiriting assessments of the world economy on Monday, adding to concerns about the economic outlook that has scuppered a rally in equity markets.
Wall Street suffered its worst one-day loss in two months on Monday, with the S&P 500 sliding 3 percent and into negative territory for the year.
Asian markets followed suit on Tuesday, with Japan's Nikkei down almost 3 percent, MSCI's measure of stocks elsewhere in the Asia-Pacific down a similar amount and European markets set to open weaker.
MSCI's World Index had soared almost 50 percent from its March low until early this month, raising concerns that markets had been too aggressive pricing in a recovery and prompting investors to book profits ahead of the traditional summer lull. The index is now more than 7 percent off its early June peak.
Prices for oil and industrial metals also gave up ground as investors questioned the strength of the recovery.
I do not think there is anyone who is all that confident about an economic recovery, said Hiroaki Osakabe, fund manager at Chibagin Asset Management in Japan.
Figures on euro zone business activity and U.S. housing data due later on Tuesday will be an important test for nervous markets, while the Federal Reserve's interest rate setting committee begins its two-day meeting.
While no changes are expected in the current short-term interest rate near zero, attention is focused on whether the Fed will expand its purchases of government debt from the $300 billion already pledged to fight the recession.
(Writing by Lincoln Feast; Editing by Bill Tarrant)