Global data point to recession easing

By Patricia Zengerle

WASHINGTON (Reuters) - Better news on manufacturing in Europe, China and India, and positive signs on U.S. home sales and construction raised hopes on Monday that the deepest economic slump in decades may have bottomed out.

Manufacturing in Europe declined at its slowest pace in six months, and grew in China and India in April, while pending sales of existing U.S. homes rose unexpectedly in March and U.S. construction spending rose a slim 0.3 percent the same month, its first increase since September.

A top U.S. Federal Reserve official said the recession is fading and growth will resume later this year.

"While overall activity is still contracting, it now appears as if the pace of contraction is diminishing, and at some point later this year, activity will bottom out and begin expanding again," Richmond Federal Reserve President Jeffrey Lacker said in a speech to business leaders.

European and U.S. shares rose -- Wall Street's leading indexes .N jumped 2.5 percent or more as investors bet the government's "stress tests" won't be bad for banks and hoped the housing data meant the recession is ending. The S&P 500 topped the psychologically important 900 level for the first time since early January.

The FTSEurofirst 300 .FTEU3 index of top European shares had ended up 1.5 percent, its highest close since January 12, with oil and gas and industrial engineering among the top sectoral gainers.

Fears of a deadly flu epidemic also eased, cheering investors. Mexico's peso currency soared and its stocks jumped after the government of the country hit worst by the flu said the worst of the illness had passed.

Oil prices rose to their highest close of the year, above $54 a barrel, on hopes an easing of the recession will pave the way for a recover in world energy demand.