Geithner optimistic on economy, Asia data encourages
NEW YORK (Reuters) - U.S. Treasury Secretary Timothy Geithner said on Monday he was optimistic some leading economies could see growth this year, a prediction backed up by data from Asia.
Still, European Central Bank President Jean-Claude Trichet said it could take time for European banks to digest the money the central bank has injected into the system and urged them to resume lending in order to secure a recovery.
While evidence began emerging in late March that the global recession was starting to bottom out, weaker data in recent weeks drove fears that stock markets have risen too quickly.
Moreover, the U.S. government on Monday disclosed a record budget deficit for June, ringing up a $94.32 billion deficit for the month, amid costly efforts to prop up the economy, banks and automakers and weak revenues.
But those fears seemed to be on hold on Monday, with markets rising in Europe and the United States as an influential analyst's bullish view on Goldman Sachs (GS.N) buoyed the financial industry.
Speaking on a trip to Britain, Geithner said there was a good chance the United States and other leading economies would resume growth rather than face a so-called double-dip recession.
"We have a very powerful set of policies in place, coming on stream. I think there is a very good chance we will see the U.S. economy and the world economy get back to recovery, get growing again, over the next few quarters," he told reporters in London.
He acknowledged that there were still "significant risks and challenges ahead," but said economic policies around the world had helped provide a base for recovery.
"I think the policies have been very effective in arresting, in mitigating the forces of the storm and we're starting to see a better basis for recovery starting to be made in the U.S.," Geithner said.
TRICHET: BANKS SHOULD LEND
The ECB last month injected 442 billion euros ($620 billion) of 12-month funds into the banking system to encourage banks to finance the real economy. But, worried about their own health, the banks parked much of that money in the safest place they could find -- back at the ECB -- potentially delaying recovery.
ECB President Trichet criticized banks for not lending the money to firms and households.
"We remind banks of their responsibility to continue to lend to firms and households at appropriate rates and in suitable volumes," he said in Munich. "It may take some time, however, for the extra liquidity to be transformed into credit."
In the United States, stocks rose following an upgrade of Goldman Sachs Group (GS.N) by prominent banking analyst Meredith Whitney, who rose to prominence last year by correctly predicting much of the financial sector's current woes. She also said Bank of America (BAC.N) was the cheapest of the big U.S. banks based on its tangible book value.
Whitney made Goldman her first "buy" rating since founding her own firm earlier this year, saying her "more bullish outlook on GS shares is deeply rooted in our sustained bearish stance on the U.S. economy and state of U.S. financials at large." Continued...
