Entries from August 2009 ↓

Losses in China’s main stock-market index ignited a sell-off in markets from Asia to Europe to Wall Street on Monday, as traders worried that a worldwide rally in stocks this summer had flown too high, too fast.

The Dow Jones industrial average fell about 85 points or 0.9 percent in early trading, and the broader Standard & Poor’s 500-stock index slid 1.2 percent. The Nasdaq was off about 1.3 percent.

Financial, energy and industrial companies, which have surged in the last five months as the recession lost force, were leading the markets lower. Shares of the government-supported insurance giant American International Group fell more than 8 percent as talk intensified that its stock was overvalued.

And oil prices fell more than $3 to dip below $70 a barrel for the first time in more than a week.

The losses came even as announcements of two corporate mergers showed that deal-making was slowly coming back.

The Walt Disney Company said that it was paying $4 billion to buy Marvel Entertainment and its stable of superheroes, including Spider Man, the X-Men, the Hulk and Iron Man. Shares of Disney slipped 1.5 percent while Marvel surged by more than 25 percent.

And the oilfield-services provider Baker Hughes said it was acquiring BJ Services, another oil-services company, for $5.5 billion in cash and stock.

This week, investors in the United States will pay close attention to the government’s monthly employment report to see whether the rate of job losses is tapering off, and whether businesses are asking their employees to work longer workweeks — which would be strong signals the recession was ending.

And automakers will report their August sales figures on Tuesday, offering a window into the impact of the government’s “cash for clunkers” automobile rebate program.

A report on business activity in the Chicago area improved in the month of August, raising expectations that report on the national manufacturing sector would offer a similarly positive reading when it is released on Tuesday.

In Asia, the hard-charging Shanghai composite index has outpaced many of the world’s other exchanges, gaining 90 percent earlier this year. But it plunged 6.75 percent to close out August with a drop of 21.8 percent, the worst performance for the month among major markets.

Monday’s fall, coupled with a drop of nearly 3 percent on Friday, has made for “a huge, huge decline,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets in Hong Kong.

The overall index was down 192.94 points on Monday to finish at 2,667.75, the lowest closing figure in more than three months. “It has brought the index into bear market territory,” Mr. Kowalczyk said. “There’s mounting concern over liquidity in the market. This is a big development.”

Although China’s markets are largely closed to foreign investors, movements in Chinese shares have increasingly been rippling into other markets.

In Hong Kong, the Hang Seng Index fell 1.9 percent and closed below the 20,000-point plateau bad credit cash loan. The Hang Seng’s loss of 4.1 percent in August marked its first monthly loss since March.

In Tokyo, one day after Japanese voters gave a landslide victory to the opposition Democratic Party, the Nikkei 225 index jumped 200 points in early trading but down 42 points, or 0.4 percent.

In Europe, the DAX in Frankfurt fell 0.96 percent, while the CAC-40 in Paris was down 1 percent. The Euro Stoxx 50, a benchmark for the euro region, fell 1 percent. The London Stock Exchange was closed for a public holiday.

Over all, European stock markets appear to be entering a phase of consolidation, a Commerzbank analyst, Andreas Hürkamp, said in a research note.

The recent gain in prices and the fact that equity markets are entering the seasonally weak period in September and October is being offset by factors like an improvement in monetary indicators and expectations of better earnings, the report said.

“All in all, we expect only a consolidation and not a correction in the coming weeks,” Mr. Hürkamp said. “We remain buyers on weaker trading days which should give investors another chance to jump on the stock market bandwagon before equity markets finally move towards our year-end targets.”

The volatile market swings in China have given some global analysts pause, and some see indications of trouble due to the vulnerable American commercial real estate sector or simply the length of time the rally in stocks has lasted.

Art Cashin, the director of floor operations in New York for UBS, said his “gut feeling” about the markets prompted him to sell some stocks last week.

“This rally’s a little long in the tooth,” he said.

Chinese banks, acting at the government’s behest, unleashed a flood of lending this spring and early summer as part of its efforts to stimulate the economy. Some of the funds were channeled into equity markets, at least temporarily, leading some analysts to warn of an asset bubble.

August saw a sharp drop in lending, to about 200 billion renminbi, or $29.3 billion, about half the total for July, Mr. Kowalczyk said, citing a news report in Caijing, the authoritative financial magazine.

“The Chinese government cannot be happy with such a drop,” he said, referring to the steep and rapid decline of the Shanghai index. “I expect them to soothe the market’s nerves about the availability of funds — some guidance, some moderation. The market is quite panicky.”

The smaller Chinese exchange index in Shenzhen also fared poorly Monday, dropping 7.2 percent.

“I think everyone’s pretty bearish,” said Thomas J. Lee, the chief United States equity strategist at JPMorgan Chase. “People I talk to think there’s a 10 percent correction coming.”

Matthew Saltmarsh contributed reporting from Paris.

U.S. Markets Follow Shanghai Lower

Hot News: India’s GDP Grew 6.1 Percent in April-June Quarter

LONDON (Reuters) – Administrators of the London arm of Lehman Brothers said the claims it is handling against the collapsed Wall Street bank could total as much as $100 billion.

PriceWaterhouseCoopers, which is working with over 100 companies, mostly in the UK but also in continental Europe, said on Sunday: "We're dealing with a large number of entities and therefore the claims could be as much as $100 billion.

"These claims are exceptionally complex and we anticipate a large amount of further work in dealing with (them)."

A significant amount of the claims arose as a result of guarantees issued by the parent company to its subsidiaries, the administrator said.

PwC said it had worked with administrators in other affiliates to understand Lehman's accounting system so a standard approach to the reconciliation of inter company balances could be agreed equifax free credit report.

"If this can be achieved then it should reduce the likelihood of affiliates suing each other in pursuit of amounts that are owed between the different Lehman estates," it added.

Lehman Brothers Holdings filed for Chapter 11 bankruptcy protection in September 2008, the high water mark of the credit crisis.

Employees, counterparties and creditors have until September 22 to submit claims with the U.S. bankruptcy court.

(Reporting by Rosalba O'Brien; Editing by Mike Nesbit)

Lehman claims could reach $100 billion: PwC

Some bondholders of the Tribune Company are seeking permission from a federal bankruptcy judge to investigate the company’s 2007 sale to the billionaire investor Samuel Zell, a deal creditors claim led to a bankruptcy filing a year later.

The request was made late Wednesday by the Law Debenture Trust Company, a firm claiming to represent 18 percent of Tribune’s bondholders. The firm is seeking documents related to the leveraged buyout to help prove that the 2007 deal was done despite knowing it could render the company insolvent. The court’s approval would give Law Debenture access to Tribune documents that would otherwise be unavailable.

Should the judge reject the request for an investigation, Law Debenture asked that an independent examiner be appointed as an alternative.

The private equity firm Centerbridge Partners is a lead member of the group that is seeking an investigation, according to a person briefed on the filing. Centerbridge did not respond to a request for comment Thursday.

In the filing, Law Debenture points to admissions by the Tribune Company that the assumptions behind the debt-heavy deal were “too optimistic.” The bankruptcy filing in December was no surprise to analysts, who have long criticized the sale to Mr. Zell as overburdening the company with more than $11 billion in debt at a time when advertising revenues were plummeting.

To finance the sale, five banks — Bank of America, Barclays, Citigroup, JPMorgan Chase and Merrill Lynch — agreed to provide more than $8 billion in loans, debt that has a higher seniority than Tribune’s bonds because it is secured by assets.

Law Debenture’s legal argument touches upon a claim known as “fraudulent conveyance,” an assertion that Tribune and its lenders should have known that sale would leave Tribune in precarious financial health.

In a statement Thursday, the Tribune Company said, “our goal is to develop and implement a plan that maximizes the value of the company for all parties in interest and treats all creditors fairly, and to do so as quickly as reasonably possible paperless payday loans.”

“We have been pursuing a process designed to achieve that goal and will continue to do so,” the company said.

With many companies acquired by private equity firms during the credit boom now struggling, several restructuring experts have said they expected such claims to arise more frequently. But such assertions are difficult to prove.

Law Debenture said that it made its request because a proposed reorganization plan would largely turn the Tribune Company over to its bank lenders. Bondholders, according to the filing, would receive only a “sliver of equity.”

The bondholder action was interpreted as a prelude to a possible lawsuit.

“Anybody who was reasonable should have foreseen this,” said Bill Brandt, a restructuring specialist based in Chicago. “Very few people are going to do well in this bankruptcy, except those at the top of the food chain, because the values simply aren’t being realized. It is precisely that circumstance that causes this litigation to appear on the horizon.”

The plan is expected to be presented by early fall, according to a person briefed on the matter. Tribune filed for bankruptcy last December with the assent of its bank lenders.

“Chapter 11 clearly should not be a vehicle to deliver reorganized equity to the lenders that caused the debtors’ demise,” lawyers for Law Debenture wrote in the filing.

Law Debenture said that it made its filing because it believed that Tribune’s official creditors committee — a group of the company’s largest claimholders — was conflicted: two of the group’s largest members are JPMorgan and Merrill Lynch.

Bondholders Want Details of Tribune’s Buyout

Hot News: European markets steady as Asia slips

TOKYO — While Japanese voters seem poised to end the Liberal Democratic Party’s long hold on power on Sunday, the momentous election has focused surprisingly little attention on the pressing problems that threaten the world’s second largest economy.

Japan’s challenges are enormous, and growing in severity. The nation is still in search of a new recipe for growth almost two decades after its export-driven model hit the skids. And now it must also find a way to pay for a rapidly aging population, despite a crushing government debt that will soon grow to twice as large as its $5 trillion economy.

Japan’s weakness was exposed during the current financial crisis, when its economy fell harder than other major economies — shrinking an annualized 11.7 percent in the first quarter. The government of Prime Minister Taro Aso responded with a $270 billion dose of old-style public works spending that has so far produced only a small rebound, economists say.

The main opposition Democratic Party, which polls show will end half a century of nearly uninterrupted rule by the Liberal Democrats, has not offered much more than piecemeal remedies to Japan’s biggest problems. Neither party has proposed to discuss politically difficult solutions, such as allowing in more immigrants — a no-no in racially homogenous Japan — or raising taxes to help reduce the big public debt burden.

“Both parties are ducking the hard issues,” said Takatoshi Ito, a professor of economic policy at the University of Tokyo. “What they do present is a band-aid for these problems, not the real surgery that Japan needs.”

Of course, it is hard for politicians in any country to advocate painful measures, particularly during an election. But as Japan’s first lower house election in memory offering voters a real choice between two competing parties, the level of debate on pressing issues has been disappointingly low, say political analysts and many regular voters.

Both parties seem to be competing to distance themselves from the small-government policies of former Prime Minister Junichiro Koizumi, perhaps the most dynamic leader Japan has had in recent years. His approach is now blamed for hurting job security and worsening social inequalities. The two parties say they favor steps to shore up Japan’s social safety net, and they have offered generous new spending to woo voters.

“It is not clear that either party has an economic philosophy, besides let’s spend more money,” said Robert Feldman, an economist in Tokyo for Morgan Stanley.

The Democrats have led the charge with a glossy 23-page manifesto promising giveaways ranging from toll-free highways to income subsides for farmers. One of their spending proposals, to give families cash allowances of $270 per month per child, has been received favorably by economists. It is aimed at encouraging more births in a country that has a shrinking population and aging work force.

The incumbent Liberal Democrats have attacked the opposition’s promises as irresponsible, though their own manifesto offers much of the same low cost payday loans. The Democrats insist they can pay for the new spending, expected to cost $177 billion a year, by slashing pork projects and other waste.

Still, the ballooning national debt remains the a major constraint on growth and spending that neither party seems willing to face. So far, Tokyo has financed its growing debt, which is several times higher than American public debt as a percentage of gross domestic product, by tapping the nation’s vast $15 trillion pool of personal savings, the product of years of high savings rates and hefty trade surpluses.

But when it finally burns through that pile of domestic cash, Japan may find that overseas investors demand sky-high interest rates, or balk altogether at buying Japanese debt.

“This could be financial Armageddon,” said Naoki Iizuka, senior economist at Tokyo’s Mizuho Securities. “Foreign investors could see Japanese government bonds as worthless paper.”

Mr. Iizuka says Japan has at most five more years to get its fiscal house before facing the prospect of serious capital flight.

Japan must do this while confronting one of the world’s worst demographic problems. The low birth rate means that there will be fewer working-age taxpayers to support a growing numbers of retirees. In 2005, there were three working people per pensioner; that ratio will drop to 1.8 by 2040, according to the Health Ministry.

Solutions exist, but they are politically unpopular, say economists and political analysts. Besides immigration, Japan could let its enviably long-lived citizens work beyond the current retirement age, which is still 60 in many large companies. Another way would be to boost productivity, allowing the smaller number of workers to produce more wealth.

This latter step would most likely require opening up Japan’s still orderly economy to greater competition, something neither party wants to talk about in the current anti-Koizumi climate. Economists say powerful bureaucrats and industry groups suppress the sort of youthful entrepreneurship needed to create new businesses.

Economists blame this sclerotic system for 12 years of lost growth: statistics from the Cabinet Office show Japan’s economy was the same size last year as it was in 1996. During that same period, the United States economy grew more than 50 percent.

But the current election may offer one big economic benefit, if it brings a change of Japan’s political guard. The ouster of the Liberal Democrats would rob Japan’s entrenched interests of their biggest defender, and open the door to newcomers.

“This would be the end of the old system,” said Mr. Iizuka. “It could make possible the changes we all know Japan needs.”

News Analysis: Lost in Japan’s Election Season: The Economy

Burning through cash and unable to stem a decline in revenue, Ireland’s former flag carrier Aer Lingus softened its stance on Thursday toward a possible deal with Ryanair, the discount airline whose hostile takeover bids it has twice fought off.

Aer Lingus said its net loss tripled to 73.9 million euros ($105.5 million) in the six months to June 30, from 21.5 million euros a year earlier. It conceded that its bankers were refusing to provide fresh loans to finance its operations.

The situation puts significant pressure on Christoph Mueller — who takes the helm as chief executive on Tuesday — to wring out further savings and ferret out new revenue, or face losing its independence.

Sean Coyle, the company’s chief financial officer, said Thursday that he expected Ryanair, which already owns almost 30 percent of Aer Lingus, to continue to pursue a takeover of the company. But Mr. Coyle, a former Ryanair executive, stopped short of saying management would seek such a tie-up, saying only that he had “no idea” if shareholders would resist a third approach from its rival.

Aer Lingus has fiercely resisted offers from Ryanair, saying that they significantly undervalued the company. Ryanair’s most recent offer, in December 2008, valued Aer Lingus at 1.40 euros a share. The stock closed Thursday at 50 euro cents, down 0.6 percent.

Ryanair, which is barred by European takeover rules from making another bid for Aer Lingus until January, did not address that possibility Thursday. Ryanair’s chief executive, Michael O’Leary, instead called on the Irish Stock Exchange and the Irish Takeover Panel to explain why they allowed the Aer Lingus board to reject its last takeover offer in December “on the basis of patently false claims about growth and profitability auto car loan.”

An Aer Lingus spokesman, Enda Corneille, dismissed Mr. O’Leary’s claims that management misled shareholders about the health of the company eight months ago. “You only have to look at the sharp changes in guidance of all the other carriers earlier this year to see that the situation has been the same for everyone,” Mr. Corneille said.

Analysts said Aer Lingus was unlikely to be forced into the arms of a suitor soon. While the carrier’s net cash position has fallen by almost 50 percent over the last 12 months, it still has about 440 million euros.

“This is not an Austrian Airlines kind of scenario,” said Stephen Furlong, an analyst for Davy Stockbrokers in Dublin. Austrian Airlines was forced this year to accept a takeover by the German flag carrier Lufthansa as its cash dwindled and debts mounted. The European Commission is expected to approve that deal by the end of the month.

For the first half, Aer Lingus said revenue fell 12 percent, to 555 million euros, with average fares for the period dropping by 17 percent. Fuel costs rose 10 percent, to 189.6 million euros, in part because of a stronger dollar, while other operating costs fell 5 percent, to 458.4 million euros.

Aer Lingus, Ailing, Open to Another Ryanair Bid

TOKYO (Reuters) – Toyota Motor Corp will cut its global production capacity to match lower sales, a company source with direct knowledge of the matter said on Wednesday.

The Nikkei business daily said Toyota planned to cut its global capacity by 10 percent, or 1 million vehicles, as early as the current financial year to March 2010, but the source said the extent and timing of the production cuts had not yet been set.

Toyota, the No.1 carmaker, has begun restoring some production cut in the wake of the global financial crisis, as inventories shrink and government stimulus efforts kick in, but it has yet to announce whether it plans permanent cuts in factory capacity.

Many car plants around the world are idle or running below capacity as the industry tries to work out how much sales will recover after the crisis passes and how U.S. firms General Motors Co and Chrysler Group LLC emerge from their deep woes.

Toyota has decided to halt a production line in Japan for about a year and a half from next spring and is considering halting a line at a U.K. plant, said the source, who declined to be named because the matter was not public.

Toyota has said it will decide this month whether to pull out of New United Motor Manufacturing Inc (NUMMI), a California joint venture with General Motors.

Those three moves would cut capacity by 700,000 vehicles, based on Toyota factory data, from Toyota's annual output capacity of 10 million vehicles.

The Nikkei said Toyota would cut capacity to 9 million cars in a bid to return to an operating profit in fiscal 2010, but the source said decisions had not been taken on such deep cuts.

Toyota forecast this month a slightly shallower annual loss, relying on deeper cost cuts and government-backed sales stimulus around the world, but there remain doubts about a sustainable recovery in demand.

(Additional reporting by Shradhha Sharma in BANGALORE; Editing by Chris Gallagher and Rodney Joyce)

Toyota to cut capacity to match sales: source

Hot News: Judge Wants More Explanation on Merrill Case

BANGALORE (Reuters) – Top office products retailer Staples Inc (SPLS.O) reported a 38 percent drop in quarterly profit as costs increased.

Net earnings fell to $92.4 million, or 13 cents a share, in the second quarter ended on August 1 from $150.2 million, or 21 cents a share, a year earlier.

Excluding a pretax integration and restructuring charge of $30 million, Staples earned 16 cents a share, in line with the average Wall Street forecast, according to Reuters Estimates.

The company, which is poised to gain from any recovery in corporate spending with its acquisition of Dutch rival Corporate Express, said in July that it was seeing a rebound at its North American delivery unit that serves small businesses.

While sales rose 9 percent to $5.5 billion, both operating expenses and costs of goods sold increased in the quarter.

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn)

Staples posts profit in line with estimates

Hot News: Warner Chilcott buying P&G drug unit for $3.1 billion

Nearly a year after its deal to purchase Merrill Lynch, Bank of America is still on the defensive.

In a court filing on Monday, Bank of America said it acted properly when it did not disclose details about Merrill’s bonuses in advance of a shareholder vote on the merger. And, the bank said it believed its view would prevail in court if the matter were put to test.

A United States District Court judge in New York, Jed S. Rakoff, demanded two weeks ago that the bank and the Securities and Exchange Commission provide a better explanation of its settlement over the bank’s failure to disclose the bonuses. The S.E.C. is also expected to file a memorandum on Monday.

Judge Rakoff said the bank’s $33 million settlement with the commission seemed “strangely askew,” and he questioned the S.E.C.’s decision to charge the bank at the corporate level rather than individual executives.

The judge requested that Bank of America supply the names of people who decided last year to not disclose the bonuses. He said he wanted to know the “who, what, where” behind the creation of the bank’s proxy statement, the document provided to shareholders before they voted on the merger.

“I cannot ignore issues of responsibility,” Judge Rakoff said at the hearing on Aug. 10. “Was there some sort of ghost that performed those actions?”

The bank did not detail which of its directors or executives were involved in the proxy disclosure decisions. It did, however, name the law firm that represented it during the merger proxy, Wachtell, Lipton, Rosen & Katz. And the bank said that Merrill Lynch’s firm was Shearman & Sterling. The bank also listed the names of the directors on Merrill’s compensation committee and pointed out that the S.E.C. did not claim that the bank acted with intention or in a reckless manner.

Merrill’s $3.6 billion in bonuses have been scrutinized in Congressional hearings this summer as well as in documents released by the New York attorney general. And Judge Rakoff said in his hearing that the bonuses seem to have been essentially paid using taxpayer money, since Bank of America had received $45 billion in bailout funds.

The bank said it was important to focus on the issue of disclosure of the bonuses, rather than their size.

“This case is not about the decision by Merrill Lynch’s board to award the incentive compensation that it did,” the bank’s lawyer, Lewis J. Liman, wrote. “Bank of America recognizes that decision has been the subject of controversy.”

Bank of America spent most of its memo on the defenses it would make in court. The bank said there was no false or misleading information in the proxy. And the bank accused the S.E.C. of seizing on “a single sentence fragment” for the accusations.

Furthermore, the bank pointed to Merrill’s financial statements, which showed last fall that money was still set aside for compensation at similar levels to the previous year, even after the merger was announced. The bank also said shareholders would have known of the bonuses because several media outlets wrote about them in general terms in advance of their payment.

Two legal experts wrote affidavits to accompany the bank’s filing, and both said the bank acted appropriately in its disclosure. One, Morton A. Pierce, the chairman of Dewey & LeBoeuf’s mergers and acquisitions group, was paid for his memo. The other, Joseph A. Grundfest of Stanford Law School, wrote his memo on a pro bono basis because he was concerned the S.E.C. would have a hard time settling future issues if Judge Rakoff does not approve its deal with Bank of America.

The S.E.C. is expected to file its memo to the judge by the end of the day. Then both parties will have two weeks to respond to each other’s filings. If Judge Rakoff does not approve the $33 million settlement, then the S.E.C. will probably drop the case, renegotiate the settlement amount or take it to court.

Bank of America Defends Its Settlement

Hot News: Stock futures rise on hopes of economic recovery

Qwest Communications International said it had eliminated tens of thousands of dollars in annual payments that it provided its chief executive and several other top officials.

In a filing with the Securities and Exchange Commission on Friday, Qwest, a telecommunications company based in Denver, said it had ended annual “flexible benefit payments” that it had been giving in lieu of perks offered to executives at other companies.

Edward A. Mueller, Qwest’s chief executive, was awarded $75,000 in such payments in 2009. Other executives received $50,000, according to the filing.

Qwest Drops Extra Pay

Hot News: Jobless Rate Went Higher In 26 States Last Month

JACKSON HOLE, Wyo. — Central bankers from around the world expressed growing confidence on Friday that the worst of the financial crisis was over and that a global economic recovery was beginning to take shape.

“The prospects for a return to growth in the near term appear good,” declared Ben S. Bernanke, chairman of the Federal Reserve, offering optimism both about the United States and the worldwide outlook.

Though the Fed chairman repeated his warning that the economic recovery here was likely to be slow and arduous and that unemployment would remain high for another year, he went beyond the central bank’s most recent statement that economic activity was “leveling out.” Speaking to central bankers and economists at the Fed’s annual retreat here in the Grand Tetons, Mr. Bernanke echoed the growing relief among European and Asian central bankers that their own economies had already started to rebound.

Even as they indulged in a bit of self-congratulation over what had been achieved since the financial crisis of last year, these central bankers were beginning to focus quietly on another big task, how they will unwind the vast emergency measures they put in place to fight the crisis.

At almost the same time that Mr. Bernanke spoke, the National Association of Realtors reported that sales of existing homes jumped 7.2 percent in July — the biggest monthly increase in more than a decade and much bigger than analysts had expected.

Investors reacted ebulliently to both the housing news and to the Fed chairman’s remarks. The Dow Jones industrial average jumped as soon as the markets opened and ended the day up 155.91 points, or 1.67 percent, at 9505.96. Though stock prices are far below their record highs, the Dow has risen 45 percent from March and is at its highest point this year.

Shares of major home builders surged on the improvement in home sales, which was the fourth monthly increase in a row. While forecasters had expected a gain, the size of it jolted investors.

But stocks for a wide range of other companies climbed higher as well, as did the prices of oil, copper and gold. Shares climbed for industrial companies, energy producers and manufacturers of chemicals, plastics and other basic materials.

“This is a bull market,” said Laszlo Birinyi Jr., president of Birinyi Associates, who said he was investing in large banks, well-established technology companies like Apple and big industrial companies like 3M and United States Steel. “There’s just a desire to be in the market and hope that the train will again leave the station.”

Here in Jackson Hole, the mood of relief and cautious confidence among central bankers and economists on Friday was almost palpable — a stark contrast to the anxiety and tension that permeated their retreat here one year ago.

“It is reasonable to declare that the worst of the crisis is behind us, and that the first signs of global growth have appeared earlier than we generally expected nine months ago,” said Stanley Fischer, governor of the Bank of Israel and a top former official at the International Monetary Fund.

In the past week, France and Germany both surprised forecasters by reporting positive growth after a string of quarterly contractions. Japan followed with its own growth report.

The Fed and other central banks will have to unwind a number of emergency measures deployed during the peak of the crisis as growth returns.

A growing number of economists and some Fed officials say the shift to tighter monetary policies and higher interest rates, though unlikely to start until at least the middle of next year, may have to be much more abrupt than normal if they are to prevent inflation two or three years from now.

“When you get into a crisis like this, gradualism is not the right strategy,” said Frederic S. Mishkin, an economist at Columbia University who was a Fed governor from 2006 until 2008. “Of course, when things turn around, you have to be aggressive in the other direction.”

Indeed, the Federal Reserve’s “exit strategy” could lead to a clash with the Obama administration. The White House plans to release its newest budget estimates next week, and administration officials said that the 10-year deficit will rise to $9 trillion — a big jump from its earlier estimate of $7 trillion.

Some Fed officials are already worried about criticism that they are financing the government’s deficits by buying up long-term Treasury securities, and the central bank announced last week that it would end that program next month.

In the future, Fed officials could feel more pressure to further tighten monetary policy as a way of countering the government’s deficit spending. The immense amount of borrowing could push up long-term interest rates, if foreign investors balk at buying up United States debt.

Assessing the extraordinary events of the last year, Mr. Bernanke argued that aggressive action by countries around the world prevented a collapse that would have been even worse than what actually took place.

Asserting that short-term lending markets are functioning more normally, that corporate bond issuance is strong and that other “previously moribund” securitization markets are reviving, Mr. Bernanke said that both the United States and other major countries were poised for growth.

In emphasizing not just an imminent end to the recession but also good chances for actual growth, Mr. Bernanke’s assessment was in some ways surprising.

Despite encouraging signs on many fronts, American retailers have reported unexpectedly weak sales in the last week — a sign that that consumer spending could drag down economic growth in the months ahead. And on Thursday, the Labor Department reported that new unemployment claims jumped again.

And on Friday, a prominent banking analyst warned that hundreds more American banks would fail over the next year, adding to the difficulties that small businesses have experienced in routine borrowing.

“There will be over 300 bank closures,” Meredith Whitney, the Wall Street analyst who accurately predicted last year that Citigroup would have to cut its dividend, said in an interview with Bloomberg Television in Jackson Hole.

Jean-Claude Trichet, president of the European Central Bank, cautioned against assuming that the world was back to normal.

“We still have a lot of work to do,” he said, adding that “it would be a catastrophe” if governments failed to heed the lessons of the crisis and financial regulation.

Mr. Bernanke acknowledged that the banking system’s problems were far from over.

“Strains persist in many financial markets across the globe,” he cautioned. “Financial institutions face significant additional losses, and many businesses and households continue to experience considerable difficulty gaining access to credit.”

World Bankers Suggest Rebound May Have Begun

Hot News: Oil fluctuates on mixed economic signals