Hopes of a rebound have lifted global share markets about 40% from a March nadir, when economic data was unremittingly bleak, but optimism has been tempered in recent days by warnings that the recovery is likely to be slow.

"US economic data is pointing to an end to the US recession. Good news? Absolutely," said Patrick Bennett, Asia FX and interest rate strategist at Societe Generale in Hong Kong. "But unfortunately the end of recession does not mean the end of pain."

The MSCI index of Asia-Pacific shares outside Japan rose 0.7% on June 19 but was down around 5% on the week, while Tokyo's Nikkei inched up 0.3%.

While data on Thursday showed that the number of U.S. workers filing new claims for jobless benefits rose in the latest week, economists were heartened by the first drop in the number of unemployed people remaining on benefit rolls since January and the biggest decline since November 2001.

Investors were also comforted by the slowing pace of contraction in the Philadelphia Federal Reserve's regional gauge of manufacturing and a rise in expectations in the index to its highest since September 2003 -- when the US economy was healing from its last recession.

US government bonds fell in response to the data, with the benchmark yield also rising on worries about the market's ability to handle $104 billion in debt to be offered in auctions next week.

"With persisting concerns about supply worries in the US, investors are focusing on whether the Fed will increase its Treasury buying," said Tomohiro Nishida, a manager at Chuo Mitsui Trust and Banking in Tokyo.

A surge in long-term government bond yields in recent weeks showed financial markets fear huge sums of money poured into economies through drastic stimulus packages to combat the recession will ultimately fuel inflation.

A sharp run-up in prices could force central banks to hike interest rates sooner than expected, potentially choking off a recovery.

Bank of Japan minutes published on June 19 revealed that one board member had told a rate review meeting in May that the BOJ should monitor long-term interest rates as rising government bond issuance could make them more volatile.

The BOJ has appeared unfazed by the yield rises in Japan, seeing them more as a reflection of growing market optimism over the economic outlook, with stock prices also climbing steadily.

Japan's export-led economy has been hard-hit by the steepest global downturn in six decades, triggered by a banking crisis tied to massive losses in the US housing market that prompted a dramatic collapse in world trade.

A widespread view the crisis was rooted in excessive risk-taking on Wall Street and in other financial centres has provoked furious debate about how to expand and coordinate the power of financial regulators around the world.

The Swiss National Bank said in its stability report on June 18 that Switzerland might have to create rules to split off parts of its dominant banks, UBS and Credit Suisse, if the economy worsened.

The two have more than US$3 trillion of liabilities -- about six times Swiss gross domestic product.

"The state of the Swiss and international financial system is -- and remains -- vulnerable overall," SNB Vice Chairman Philipp Hildebrand told a news conference in Berne.

"The situation for the big banks appears more difficult. In addition to the still sizable market risks, they face significant credit risks overall." - Reuters