The slew of positive bank results last month planted seeds of hope into land that for the past 18 months has been barren. While UBS is still suffering, Goldman Sachs, Citi and JPMorgan posted stronger than expected earnings for the first quarter of 2009.
JPMorgan trumpeted record revenues and net income in its investment bank. At the same time, the merger and acquisition market sprang back into life. On a single day in April, 10 deals were announced worth more than $27bn, with more than half of their value paid in cash.
Equally promising is the growing confidence of institutional investors. According to State Street Global Markets' Regime Map - which charts cross-border equity flows - flows into the US were in the 98th percentile in March. This is the best month for US flows since 2002; monthly flows have only been higher on 2% of occasions since 1997.
All this good news has led to talk of 'turning points'. Chancellor Angela Merkel has intimated that Germany may be nearing the bottom of its economic downturn. Others, paraphrasing a speech by Winston Churchill, say that if we are not at the beginning of the end, then it may be the end of the beginning.
But markets are still far from steady. On April 20, a blogger claimed that a copy of the US stress tests had been leaked and that 16 of the 19 banks were technically insolvent. Bank stocks nosedived - the KBW Bank Index fell 9.3% - despite reassurances from the US Treasury that there had been no leak.
There are many reasons to hope that the worst is behind us, but investors are signalling loud and clear that they do not believe that one better quarter makes a recovery.
