TOPWRAP 7-Stocks soar despite mixed signs of crisis recovery

(For full coverage of the financial crisis [nCRISIS])

* U.S. stocks leap on bank and tech optimism
* China upturn seen but data weak in U.S. and Europe
* Second-largest U.S. mall owner files for bankruptcy
* Fed official says U.S. recession should end mid-year
* AIG sells U.S. auto insurance arm to Zurich

(Recasts with market close, Google results, Zurich/AIG deal)
By John O'Callaghan
WASHINGTON, April 16 (Reuters) - Hope grew on Thursday that
China's slowest quarter on record may mark a bottom to the
global economic crisis as optimism over banking and technology
helped stocks defy weak U.S. and European data with a strong
rally.
But General Growth Properties , the second-largest
U.S. mall owner, underscored the tenacious grip of the downturn
and trouble caused by frozen lending by filing for bankruptcy
protection in the biggest real estate failure in U.S. history.
[nN16227089]
General Growth said its core business was solid but that
bankruptcy was the only way it could refinance debt.
JPMorgan Chase , the No. 2 U.S. bank, started the
trading day by bolstering hopes of stabilization in the
financial sector with quarterly results that beat forecasts.
Google , the top U.S. Internet search company,
added to a brighter outlook for the tech sector by announcing
stronger-than-expected profits after the closing bell.
Improved investor sentiment about the U.S. banking and tech
sectors helped to drive the Dow Jones industrial average <.DJI>
up 1.19 percent, the S&P 500 <.SPX> by 1.55 percent and the
tech-heavy Nasdaq <.IXIC> by 2.68 percent. [MKTS/GLOB]
"We are getting a much better view in terms of what's
happening at the corporate level," said Barclays Stockbrokers
strategist Henk Potts. "While it's not positive, it's certainly
not as gloomy as many market participants had feared."

MIXED SIGNALS
Prospects were cloudier on the economic front.
China, the world's third-largest economy, started this year
with its weakest quarter since records began in 1992 as its 6.1
percent growth rate fell below the prior quarter's 6.8 percent
level and a consensus forecast of 6.3 percent. [nSP421707]
But analysts saw optimistic signs in quarter-on-quarter
growth, which they estimated in the range of 5.3-6.2 percent
because the Chinese government does not publish the data.
The International Monetary Fund said the global recession
is likely to be unusually long and severe, with recovery
sluggish since the crisis took root in reckless bank lending to
the U.S. housing market. [nN16252887]
The IMF called for aggressive and coordinated monetary and
fiscal policies, saying restoring confidence in the financial
sector was important for a recovery to take hold.
But Dennis Lockhart, a top U.S. Federal Reserve official,
said the recession in the world's largest economy should end by
mid-year with growth slowly picking up. He added that there
were "encouraging signs that support cautious optimism."
Americans are becoming less pessimistic about the economy's
prospects but are still worried about job security, a Gallup
survey showed. About 37 percent said economic conditions were
getting better -- the best showing since mid-September.
Similar sentiments came from Bank of England Monetary
Policy Committee member-designate David Miles, who said the
worst of Britain's recession "may well be behind us."
Still, weak European and U.S. data were reminders that the
recovery may not be fast, with the number of Americans claiming
jobless benefits hitting a record high in early April and new
U.S. housing starts falling sharply in March. [nN161166]
"While the situation in housing and in the labor markets is
not necessarily deteriorating, it's clear that there is no real
sign of recovery whatsoever," said Matthew Strauss, senior
currency strategist at RBC Capital Markets in Toronto.
Industrial output in the euro zone fell by a record 18.4
percent year-on-year in February and inflation halved to an
all-time low in March, adding to pressure on the European
Central Bank to ease policy.
The grim European numbers came after U.S. data on Wednesday
showed industrial production fell a sharp 1.5 percent in March
and by an annual rate of 20 percent in the first quarter. U.S.
consumer prices also dropped unexpectedly in March.

AIG DEAL AND JPMORGAN BONDS
As much of the financial sector struggles, the results of
"stress tests" to gauge how the 19 biggest U.S. banks would
fare should the recession worsen will be publicly disclosed on
May 4, a regulatory official said.
Markets are anxiously waiting to see which banks are on the
path to recovery and which need more government rescue money.
There was some good news for American International Group
as Zurich Financial Services said it will buy
the bailed-out insurer's U.S. auto coverage business for $1.9
billion. [nN16259072]
For AIG, once the world's largest insurer, the divestiture
is its largest since its rescue by the government in September.
U.S. taxpayers have taken a roughly 80 percent stake in AIG in
exchange for support of up to $180 billion.
JPMorgan, which said better investment banking performance
offset higher losses from consumer debt, launched a $3 billion
bond sale on Thursday that does not have government backing --
its first such deal in about eight months. [nN16542451]
Its rival, Goldman Sachs , also posted surprisingly
good first-quarter profits on Monday and said it planned to
raise $5 billion of common shares to help repay the $10 billion
it got in federal rescue money.
Asian shares rose and European stocks hit a two-month high
on JPMorgan's results and comments by Nokia , the
world's top cellphone maker, that demand was becoming more
predictable in the second quarter.
A Reuters poll showed confidence at Japanese companies
remained near record lows, but Swiss drugmaker Roche
and French food group Danone both stuck to their 2009
earnings targets. [nLG530664] [nLF588860]
The dollar <.DXY> and yen rose against the euro
. While oil edged up toward $50 a barrel, gains
were limited by the mixed economic data.
(Reporting by Reuters bureaus around the world; Editing by Dan
Grebler)
((john.ocallaghan@thomsonreuters.com; +1 202 789 8015))
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Keywords: FINANCIAL/

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