China exports slump; Citi cheers investors

Citigroup said it was profitable in the first two months of 2009 and Toshiba was reported to be set for an operating profit of $1 billion next year, two rare shards of corporate news to lift markets, reported Reuters.

Asian stocks rose on Wednesday, following a strong rally on Wall Street, but economic news remained gloomy.

Wholesale prices in Japan fell in February by the biggest margin in six years, prompting warnings that deflationary pressures are spreading through the economy and have already filtered down to consumer goods.

The International Monetary Fund said the world economy was gripped by a "Great Recession" and would contract this year in what Managing Director Dominique Strauss-Kahn said would be the "worst performance in most of our lifetimes."

Most rich countries are already in recession, with Germany and France reporting more grim data on Tuesday, and a report from a think tank on Wednesday said Britain's recession deepened in the three months to February.

But Citigroup's improved performance prompted hopes the shattered banking system, kept afloat by massive government bailouts in the United States and other industrialized countries, could be through the worst of the crisis.

Citigroup Chief Executive Vikram Pandit, whose company's share price fell below $1 last week, told employees it was having its best quarter-to-date performance since the third quarter of 2007.

"I am most encouraged with the strength of our business so far in 2009," Pandit wrote in a memo to staff on Monday. "We are profitable through the first two months of 2009."

Citigroup earned $2.2 billion in the July-September period in 2007, the last quarter it made money. It has since posted five straight quarterly losses totaling about $37.5 billion.

In Japan, where many leading firms have cut production and jobs to cope with a collapse in exports, the Nikkei business newspaper reported that Toshiba Corp would likely see an operating profit of 100 billion yen ($1 billion) for the year to March 2010.

That contrasts with the consensus estimate for a 103 billion yen loss in a poll of 13 analysts by Reuters Estimates. Toshiba's shares jumped more than 8 percent.

Hit by sliding prices and sluggish demand for semiconductors, Toshiba, the world's No.2 maker of NAND flash memory after Samsung Electronics, has projected an operating loss in the year to the end of March 31 of 280 billion yen.

The Toshiba news added to the bullish mood in Tokyo's share market, where the Nikkei share average jumped 4 percent to bounce from a 26-year closing low on Tuesday. The rise followed gains of around 6 percent for the main U.S. stock indexes.

"Investors have been overly risk-averse and tried to shrink their positions both in Japan and the United States, but this attitude may ease a bit after bank shares that had been weak for so long pushed up Wall Street," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

That contrasts with the consensus estimate for a 103 billion yen loss in a poll of 13 analysts by Reuters Estimates. Toshiba's shares jumped more than 8 percent.

Hit by sliding prices and sluggish demand for semiconductors, Toshiba, the world's No.2 maker of NAND flash memory after Samsung Electronics, has projected an operating loss in the year to the end of March 31 of 280 billion yen.

The Toshiba news added to the bullish mood in Tokyo's share market, where the Nikkei share average jumped 4.5 percent to bounce from a 26-year closing low on Tuesday. The rise followed gains of around 6 percent for the main U.S. stock indexes.

The worst financial crisis since the 1930s stemmed from huge losses on risky U.S. housing loans, which in turn triggered a dramatic drying up of credit, and has spread through the rich world and into trade-dependent emerging economies.

IMF Managing Director Strauss-Kahn said the Fund was still projecting the world economy will recover from mid-2010, but only if governments move quickly to implement stimulus measures and banks' balance sheets are cleansed.

"On the restructuring side, things are really lagging," Strauss-Kahn said in an interview with Reuters. "I'm afraid that if it goes that way for two or three more months then recovery in 2010 will be difficult."

Despite Wednesday's relief in the stock market, Japan remains on course for its longest recession in modern times and the government, which has already proposed its biggest ever budget to revive the economy, faces calls to do more to support growth.

Japanese wholesale prices fell 1.1 percent in February from a year earlier, accelerating sharply from 0.3 percent annual drop seen in January, prompting warnings that deflationary pressures are spreading through the economy and have already filtered down to consumer goods.

In another gloomy sign, core machinery orders fell 3.2 percent in January as companies cut spending.

"Price declines are spreading from materials to other goods, and consumer prices are likely to start falling," said Azusa Kato, an economist at BNP Paribas. "Japan is likely to enter a mild deflationary period."

China reported on Tuesday that consumer prices fell in the year to February for the first time in six years following two months of falling wholesale prices.

Deflation sets off warning flags for policy makers because it can lead to a drag on consumption as shoppers hold back in expectations of yet more price falls. Protracted deflation also increases the read burden on repaying debts.

Finance ministers from the G20 group of rich nations and emerging powers will meet this weekend in Britain to prepare for a summit in London on April 2, where leaders hope to present a united front in tackling the crisis.

Summit host Britain is one of the industrialized nations hardest hit by the recession.

The British economy shrank by 1.8 percent in the three months to February, the National Institute of Economic and Social Research said on Wednesday, following a fall of 1.7 percent in the three months to January.

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