By Martin de Sa'Pinto and Jason Subler
ZURICH/BEIJING (Reuters) - A drop in Chinese exports, sliding German factory orders and falling prices in Japan underscored the weakness of the world economy, as the IMF said governments were too slow in ridding banks of toxic assets.
Switzerland's UBS AG highlighted the depth of the problems facing the banking industry. The world's biggest wealth manager said on Wednesday earnings would remain at risk for some time as it revised up its full-year net loss to 20.9 billion Swiss francs ($18.1 billion).
This deflated some of the optimism sparked by signs of recovery at U.S. banking group Citigroup Inc, which fueled strong gains on stock markets in the United States and Asia.
But European stocks bounced back from early losses. At 1110 GMT, the pan-European FTSEurofirst 300 was up 0.8 percent and futures for U.S. equity markets were between 1 percent and 1.3 percent higher.
"So weak of late ... the market has been latching on to the idea that financials have priced in the worst. The market has digested UBS and decided they are not as bad as expected," said Bernard McAlinden, strategist at NCB Stockbrokers.
International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn said he was still expecting the world economy to recover from mid-2010, but only if governments move quickly to implement stimulus measures and banks' balance sheets are cleared of toxic assets.
"On the (bank) restructuring side things are really lagging ... I'm afraid that if it goes that way for two or three more months then recovery in 2010 will be difficult," he told Reuters in an interview.
The effects of the economic downturn are being felt on global trade flows, with China reporting its trade surplus shriveled to $4.84 billion in February, much lower than analysts had expected.
Exports fell by a quarter from year-ago levels, the biggest drop since bankers started keeping records in 1993.
"China has finally and spectacularly succumbed to the world financial crisis on the export side, and it's difficult to see why that would improve in the short term," said Paul Cavey, an economist with Macquarie Securities in Hong Kong.
BEST EFFORTS
Governments are pumping money into their economies and central banks are slashing interest rates in a bid to prevent recession turning to slump.
The U.S. Congress on Tuesday approved a $410 billion bill to fund most of the government through to September 30, despite Republican objections to the price tag.
South Korea also plans to introduce a supplementary budget worth $20 billion this month to boost domestic demand, the ruling party was quoted as saying.
In Britain, the Bank of England will officially start quantitative easing -- effectively printing money to help pull the economy out of recession.
Despite governments' best efforts, however, economic data show no signs of getting better.
Japan said its wholesale prices fell 1.1 percent in February from a year earlier, the biggest annual fall in nearly six years and prompting fears of deflation.
"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.
In Germany, producer prices fell 1.2 percent month-on-month in January, while manufacturing orders for the same month plunged 8 percent versus December, their second-biggest drop since reunification in 1990.
"The prospects for industrial production remain extremely subdued," the Economy Ministry said.
Providing a glimmer of hope, U.S. mortgage applications rose for the first time in three weeks as near-record low interest rates spurred demand for home refinancing and purchase loans, data from an industry group showed.
The world's leaders are under pressure to take further action to boost growth.
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.
Britain is one of the industrialized nations hardest hit by the recession and said its goods trade gap widened more than expected in January, as the trade balance with non-EU countries slumped to a record deficit.
Asia stocks rose, with Japan's Nikkei share average bouncing 4.5 percent from Tuesday's 26-year closing low.
This followed gains of around 6 percent for the main U.S. stock indexes and was helped by a report in the Nikkei business newspaper that Toshiba Corp was likely see an operating profit of 100 billion yen ($1 billion) for the year to March 2010, against forecasts for a loss.
(Additional reporting by Reuters correspondents worldwide; Writing by Mark Potter; Editing by David Holmes)
