Despite the continuing economic gloom, stock markets around the world continued a surging recovery from their March lows, with some markets gaining 30% in recent weeks. Results were perhaps kickstarted by positive developments at the G20 Summit in London in early April, which provided reassurance that the global economic slowdown is being addressed as a global priority.

 The banking and auto sectors were at the forefront of business news in April. Chrysler, which had been given 30 days to come up with a restructuring plan, fell short of that objective, and announced on April 30 that it was seeking bankruptcy protection. General Motors was given 60 days (until May 31) to achieve its restructuring plan, so it is likely that the auto industry will dominate business headlines for some time to come.

 Banking stocks, particularly in the U.S., continued to show extreme volatility when compared to historic norms. While unanticipated strong quarterly results sent some U.S. bank stocks soaring early in the month, downside volatility was caused by media reports regarding the so-called “stress tests” being carried out in the U.S. banking system. Despite reassurances from U.S. Treasury Secretary, Timothy Geithner, that the “vast majority” of banks had enough capital, a report a few days later in the Wall Street Journal contented that Bank of America and Citigroup would require billions of new capital in order to meet the stress test requirements.

 The Bank of Canada (BOC) lowered its key overnight interest rate by 25bps, to 0.25%, and indicated its preparedness to maintain this target rate until mid-2010. The BOC also revised its projections for the Canadian economy, forecasting a decline of 3% for 2009—a dramatic revision to its earlier estimate of a 1.3% decline in GDP. The U.S. Federal Open Market Committee (FOMC) also met, but with U.S. interest rates already in a range of 0 — 0.25%, there is minimal scope for further lowering. The FOMC did indicate that the current rate would likely be kept low for an extended period. U.S. GDP has now fallen for three consecutive quarters, with the most recent figures showing the world’s biggest economy shrank at an annualized rate of 6.1% in the most recent quarter.

 In what some economists refer to as “green shoots” of a recovery, the Canadian real estate market showed some signs of stabilizing, with monthly sales figures improving for two consecutive months. In the U.S., the Case-Shiller Home Price Index showed the pace of price declines is slowing, and the Conference Boards Consumer Confidence

Index jumped in April. However, at month’s end the world’s attention shifted to health issues, with the alarming spread of the H1N1 “swine flu” threatening to be declared a global pandemic. While Mexico continues to be the epicentre of the outbreak, the impact on tourism and related industries, such as airlines, may possibly hinder any fragile signs of economic recovery.

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May 22, 2009