Sure, things look rosy for Goldman Sachs (GS.N), but the firm hardly represents the broad U.S. economic situation, as investors are looking over a mélange of lousy data, with dribs and drabs of mildly encouraging information in the mix.

Tuesday's retail sales figures weren't all that great - the strength comes from auto sales and rising gasoline prices (and rising gas prices aren't exactly great for consumers) - and Wednesday's data on capacity utilization and energy inventories are likely to confirm the ongoing slack in the economy.

So what to make of the statements from CSX Corp. (CSX.N) chief executive Michael Ward, who told Reuters the worst of the recession has been seen? Data on capacity utilization doesn't suggest a pick-up in demand, and the giant inventories of distillate products in various parts of the country also suggest the economy is sputtering, not chugging.

Weekly data on energy product inventories will be released Wednesday. Notably, distillate stocks - that's diesel fuel, jet fuel and heating oil - were at 158 million barrels as of the July 3 week, or about 55 million barrels above normal. Of particular interest is the inventory of low-sulfur diesel located on the western U.S. coast. Refining production has been in decline here over the past year, but inventories have not been drawn down to any great degree.

In a strong economy, stocks would likely fall - but they're not, despite declining refinery output, because of slack consumer demand for imports that come into Pacific ports. "If we're not seeing a material drawdown in supply, I would think that's indicative of weakness in overall demand in the market," says Stephen Schork, who writes the Schork Report, an energy market newsletter. "We're simply not manufacturing this stuff right now."

Data on rail traffic is no more encouraging, with North American rail freight down 20 percent in the first half of the year when compared with 2008. Ward of CSX predicted that third-quarter volumes will fall by double digits, but the pace of decline will be lower than this quarter, when it reported a 21 percent drop in freight volumes. So we're back to the second derivative again - the rate of change may be improving, but the underlying numbers are still negative. Another quarter or two, and we'll see if the economy is picking up steam, or if Michael Ward was blowing smoke.

Pope Benedict issued an ambitious call to reform the way the world works on Tuesday shortly before its most powerful leaders meet at the G8 summit in Italy. His latest encyclical, entitled "Charity in Truth," presents a long list of steps he thinks are needed to overcome the financial crisis and shift economic activity from the profit motive to a goal of solidarity of all people.

Following are some of his proposals. The italics are from the original text. Do you think they are realistic food for thought or idealistic notions with no hope of being put into practice?

• "There is urgent need of a true world political authority. .. to manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration... such an authority would need to be universally recognized and to be vested with the effective power to ensure security for all, regard for justice, and respect for rights."
• The economy needs ethics in order to function correctly - not any ethics whatsoever, but an ethics which is people-centred..."
• "Financiers must rediscover the genuinely ethical foundation of their activity, so as not to abuse the sophisticated instruments which can serve to betray the interests of savers. Right intention, transparency, and the search for positive results are mutually compatible and must never be detached from one another."
• "Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value... there is nevertheless a growing conviction that business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference... What should be avoided is a speculative use of financial resources that yields to the temptation of seeking only short-term profit, without regard for the long-term sustainability of the enterprise, its benefit to the real economy and attention to the advancement, in suitable and appropriate ways, of further economic initiatives in countries in need of development."
• "One possible approach to development aid would be to apply effectively what is known as fiscal subsidiarity, allowing citizens to decide how to allocate a portion of the taxes they pay to the State."

(Photo: Pope Bendict, 1 July 2009/Tony Gentile)

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By Barani Krishnan

A decade ago, Malaysia's former deputy prime minister Anwar Ibrahim was on trial for sodomy and corruption in a trial that exposed the seamy side of Malaysian justice and the anxieties of a young country grappling with a crushing financial crisis and civil unrest.

Anwar is Malaysia's best known political figure, courted in the U.S. and Europe and probably the only man who can topple the government that has led this Southeast Asian country for the past 51 years.

Photo: Anwar Ibrahim, with a bruised eye, at court on Sept 30, 1998 during his his first trial. REUTERS/David Loh

Now the leader of the opposition, will go on trial next week again charged with sodomising a 23-year old male aide. The trial once again looks likely to provide gory evidence and bringing some unwanted attention from the world's media on this Southeast Asian country of 27 million people. It could also embarrass the government and draw international criticism.

Anwar vowed in a recent interview to fight what he says are trumped up charges.

The 14 months I spent covering the 1998 trials saw Anwar accused of sodomy with three men and having sex with a woman over a period of years. This case is simpler, there is just one accuser. All homosexual acts are illegal in this mainly Muslim country and sex outside marriage is illegal for Muslims.

The first trial was gruelling. Lines began as early as four in the morning as people tried to get into the court that could seat less than 200. Most of the spectators were ordinary people, but there was a sprinkling of dignitaries and businessmen who had known Anwar when he was in office.

There was a separate media queue and again a fight to get in line as dozens of reporters from local and international outlets jockeyed for space. Ringing the court were hundreds of riot police, backed by watercannon, waiting for trouble in a country where there were daily protests at the time, often involving tens of thousands of people.

Once inside the courtroom, things were equally unpredictable. Judge Augustine Paul, plucked from obscurity to oversee Malaysia's most important criminal trial, won national fame for his oft-repeated response of "not relevant" to evidence introduced by the defence team.

The evidence itself was often contradictory and often bizarre. Ummi Hafilda Ali, a star witness for the prosecution called Anwar a "dog" and prayed that he would contract AIDS. At one stage the prosecution paraded a mattress in and out of the courtroom, saying that semen stains showed Anwar had had sex with a man on it.

One day outside the court, a witch doctor cast a spell, for no apparent reason.

Anwar showed up sporting a black eye that he said had been inflicted on him in prison by the country's police chief. This time round he says that he was forced to strip and his sexual organs measured in a hospital.

The evidence to be presented by the prosecution this time looks likely to be just as sensational. The malaysianmirror web portal, backed by one of the government parties, said there will be 30 witnesses, a carpet and a video recording, as well as a DNA evidence brought into court.

Anwar's team, citing two medical reports, says there is no evidence that Saiful Bukhari Azlan was sodomised. Saiful meanwhile has sworn on the Koran that he was and wasn't best pleased when the charge against Anwar was changed to consensual sex.

One key actor in the whole drama is missing this time round. Former prime minister Mahathir Mohamad, who critics say used the 1998 trial to drive Anwar from office and to humiliate him, is no longer in power. That removes some of the sting.

Even so, incumbent premier Najib Razak attracts plenty of ire from the opposition. He has been forced to deny allegations from the opposition and opposition-supporting websites that he was involved in the lurid murder of a Mongolian model.

The country remains tense in the wake of the 2008 general election in which the government lost its customary two-thirds majority.

Can Anwar survive another trial? Without him, can the opposition prosper and have a real chance of winning at the ballot box  in elections due to be held by 2013. Can Najib survive as prime minister if Anwar remains free and can he implement economic reforms?

More than a “nice to have,” investor sentiment is running heavily on the side of environment, social and governance (ESG) factors, according to the latest Thomson Reuters Perception Snapshot.

Feedback from 25 global buy-side investors found that 84 percent evaluate ESG criteria to some degree when making an investment decision.

The remaining 16 percent say ESG issues are not considered until a company’s ability to generate high returns is hindered by these factors.

Some of the selected comments:

“ESG only plays a role to the extent that it is an overhang on the stock. There is no moral component to investing. We are value neutral when it comes to our investment decisions, but we are not value neutral in our lives. We have a fiduciary duty to our clients, to the people who give us money to manage to maximize returns, which means that we can not be limited by our own personal morality. If I see a cigarette company that looks interesting I may invest in it even though I might not like it
personally.” - U.S. Hedge Fund Investor

“I am convinced that companies that follow the philosophy of social and economic responsibility are performing better in the long-term than those that do not.” - European Core Growth Investor

The report dovetails with Tuesday’s push by U.S. President Barack Obama to push for tougher industrial standards aimed at lowering greenhouse gas emissions.

Obama ordered the U.S. auto industry, where the hand of government is firmly in control (GM and Chrysler, but not Ford) to make more fuel-efficient cars to cut emissions and increase gas mileage.

The House of Representatives started its debate on the 946-page Democratic bill on Tuesday. Republicans are arguing the legislation would burden the economy with higher energy costs.

Does that matter, when scientists reported on Tuesday that global warming’s effects this century could be twice as extreme as estimated just six years ago?

Massachusetts Institute of Technology scientists estimate the Earth’s median surface temperature could rise 9.3 degrees F (5.2 degrees C) by 2100. That’s up from the 4.3 degrees F (2.4 degrees C) estimate in 2003.

The U.N.’s Intergovernmental Panel on Climate Change said seas would rise by between 18 and 59 cms (7-24 inches) this century. But it pointed to big uncertainties about ice sheets in Greenland or Antarctica — one IPCC estimate was that this ice could add up to 20 cms to sea level rise.

Oil prices have been trading in an unusually strong positive correlation with equities markets over the past few months on hopes that signs of an economic recovery could mean a boost for energy demand.

But with oil and product inventories swelling and little sign of demand improving in the United States and other big developed economies, analysts warn that the linkage may be hard to maintain, especially if U.S. motorists cut back on vacations this summer.

About a year ago investors hotly debated what would be the shape of a world economic recovery — would it be a steep V? Or could it be moderate U, stagnating L or double-dipping W?

Now ratings agency Moody’s is introducing the new scenario of “hook-shaped” recovery.

This has the steep downturn signalled by the U-shaped scenario, but neither the steep but delayed rebound of the U scenario, nor the flat stagnation of the L-shaped scenario. Instead, the agency says, it has an upward tilt that lies somewhere in between, implying a gradual and painful economic recovery.

“We cannot rule out that the hook-shaped scenario will evolve into an L-shaped scenario — and there is a real risk of this materializing – but it is too early to adopt the latter as our central scenario. This is because the full effect of government stimulus policies has yet to be seen,” Moody’s says.

The steady stream of less-bad-than-expected economic data has evidently been working as a builder of optimism. Confidence in improved economies and financlal market conditions is growing.

One of the biggest surprises has been Germany's ZEW economic sentiment survey -- which polls analysts and economists in Europe's largest economy. Not only did the index jump this month, it entered positive territory for the first time since July 2007. That was before the credit crisis hit.

U.S. financial services firm State Street also reports that the mood among institutional investors in North America, Europe and Asia is at a nine month high. The main point about this survey is that it is extraplolated from the actual buying and selling patterns within $12 trillion that State Street holds for investors as a custodian.

So, things are on the up. But would that not be expected given the huge amount of money being pumped into the world economy by governments and central banks? Or after global stocks have risen close to 30 percent on a period of about six weeks?

What is always unclear when it comes to sentiment indicators is whether they point to someting new or just reflect exisiting circumstances.

But maybe it does not matter. If people think that things are going to get better, doesn't that just mean they are more likely to?

(Photo: Jeremy Gaunt)

Five things to think about this week:

EARNINGS DELUGE
– A heavy U.S. earnings week looms and the European reporting calendar is picking up. While more banks and financials will be reporting (e.g. Bank of America, Bank of New York Mellon, Credit Suisse and a trading update due from Barclays), results will start flowing from a wider range of sectors in both the U.S. and Europe (ranging from Apple and IBM to Glaxo SmithKline, Du Pont, Coca Cola). Health of the broader economy on display.

MACRO SIGNALS
– The more mixed signals that earnings send, the more investors are likely to look to macro and other indicators as a cross-check of whether the stock market rebound is sustainable and whether the economy is anywhere near an inflexion point. Flash PMIs and Ifo for April will give an early indication of how economic activity was faring as Q2 got underway. Trade data from Japan is also due for release.

FISCAL HELP
 – The UK budget on April 22 is expected to issue grim forecasts and extend a helping hand to some sectors, such as autos. The fiscal presentation will keep the spotlight on the limited room for budgetary manoeuvre in Britain and elsewhere with past bailouts and support measures leaving tough decisions to be made on public spending, taxes, etc.

G7-IMF
– The G7 finance ministers’ meeting in Washington comes soon after G20 earlier this month and therefore is unlikely to pull any rabbits out of hats. Moreover, there appears to be a less obvious need to spotlight FX given subsiding implied vols for major FX rates and the U.S. Treasury statement that China is not manipulating FX. Markets are looking for followthrough on G20 pledges.

EMERGING OPPORTUNITY
 – Emerging markets have proved resilient in the earnings season, withstanding occasional down days on major indices and most recently drawing support from nascent signs that the Chinese economy has put its worst quarter behind it. Investors’ willingness to look anew at the safer parts of the emerging universe is prompting some sovereigns to use this window of opportunity to launch eurobonds or look into doing so.

Is beauty a defensive sector? Swiss bank UBS surveyed 4,000 women in Western Europe and the United States about their use and purchasing of skin and hair care products — capturing 15 percent of the total global personal care market.

The findings paint a gloomy picture, consistent with the current economic climate. There is a marked rise in de-stocking as more consumers opt to buy new products only when the old ones run out; value for money is at the forefront of purchasing decisions as is promotional activity; advertising is playing a smaller role as impulse buying becomes less frequent.

Interestingly, however, more than 50 percent of the respondents answered this question by saying that the economic environment plays no role in their use/purchase decision.

In skin care, the largest category by far is day cream with 86 percent overall regular usage, followed by cleansers and make-up removers. Top five players here are L’Oreal, Beisersdorf — which owns Nivea, La prairie and Eucerin, Yves Rocher, Estee Lauder and Johnson & Johnson, which account for an average 48 percent of overall skin care consumption.

UBS analyst Eva Quiroga, who wrote the 84-page report on “European Bubble & Beauty” reckons brands such as Dove, Olay and Nivea are in the right spot in the current environment, while those including Estee Lauder, L’Oreal and Lancome are likely to be more challenged.

For all the designer drinks and gourmet foods - from raw oysters to sushi, and the sea of men in expensive suits and bejeweled women in elegant gowns, the setting seemed fit only for celebration.

But dressed as they were to the nines, investors attending "A Night with the Bears" at Toronto's upscale Elgin Theatre, were eager to hear the worst, on the edges of plush seats amid predictions of market doom from some of the continent's savviest
financial minds.

"I only wish we'd sold tickets," said a smiling Eric Sprott, arguably Canada's best known hedge fund manager and chairman at Sprott Asset Management Inc, as he looked out at the 1,500 or so crowd.

In a media room below stage, journalists were held equally rapt by the star speakers after being treated to a hand-operated elevator ride.

Once there, rows of chairs slowly filled as smartly-dressed servers roamed the dimly-lit space
offering drinks to journalists briefed quickly.

The message?

When an economic recovery takes place -- and it won't take place any time soon -- it's going to be a weak and shallow recovery.

"Still negative growth, still the worst recession we've had in the last 60 years, still the worst financial crisis since the Great Depression, still even many of the largest banks are going to be found insolvent," said Nouriel Roubini, a professor of economics at the New York University's Stern School of Business, who rose to celebrity status after sounding early warning signs about housing bubbles and the credit crisis.

Later, experts on stage predicted bank failures and harsher times unless back-to-basics medicine is applied to cure a U.S. economic "pneumonia" that spread to the rest of the world late last year.
"There's a buyer's strike and the market is not coming back," said Meredith Whitney, a Wall Street veteran of more than 15 years and one of it's most bearish bank analysts. The groan from Torontonians was audible.

Canada's financial system, for many years criticized for being heavily conservative, is now credited for being among the world's soundest and most resilient to the global crisis.

Canadian banks are routinely ranked as the world's most solid, having remained profitable despite a crisis that pushed many U.S. and European institutions to the brink of insolvency.
Whitney predicted U.S. banks will need to start raising capital by selling hard assets, and advised investors to "stay tuned" for opportunities.

Roubini, introduced to the audience by his nickname "Dr. Doom", appeared a tad irritated by the moniker, but not enough to change his tune.

"I don't think I'm too bearish," he told reporters. "I am more a realist rather than a pessimist."

"I'll be the first one to call for the bottom of this economic contraction, recovery of the market when I see a sustained economic and, therefore, financial recovery. I don't define myself as a permabear."

He says he can't be too bearish because he thinks all the massive stimulus measures and rate cuts around the globe will eventually kick in to avert an "L-shaped" near-depression like the one Japan experienced.

He described the U.S. recession as three times as long and five times as deep as the last, and warned a recent stocks rally was just a precursor to another fall.

"For the first time in more than 60 years we have a global, synchronized recession."

(Additional reporting by Jennifer Kwan)