The department said that sales of new homes in the US rose 4.7 per cent in February, also after six months of consecutive declines, adding to last week's 5.1 per cent rise in existing home sales.

The data, together with the statement by Barack Obama, the president, that "we're beginning to see signs of progress" on Tuesday night, may have given investors a glimmer of hope.

Tipping point

Al Jazeera's John Terrett, reporting from New York, said the figures were "not insignificant".

"The markets feel that, although there is a long way to go and a lot more pain to come, the numbers appear to be lining up and it seems to be that we are getting to the edge, the tipping point, when the economy returns to a little bit of stability," he said.

"We are not quite sure if this is sustainable because numbers are still volatile"

Song Seng Wun,
economist

Meanwhile, sources in the Obama administration told news agencies that an extensive overhaul of financial regulations relating to financial firms, hedge funds and derivatives markets was being planned.

The US treasury will work with congress to form a powerful regulator with the authority to look deep into financial firms other than banks, such as hedge funds and private equity companies, officials said on Wednesday.

"The crisis has made clear that certain large, interconnected firms and markets need to be under a more consistent, and more conservative regulatory regime," one official told the Reuters news agency.

Timothy Geithner, the US treasury secretary, is expected to outline the plans in testimony before congress on Thursday, and the proposals will form the basis for discussions on regulatory reform when Obama meets with leaders from the Group of 20 rich and developing nations on April 2.

Positive territory

Japan's benchmark Nikkei share average was up by just under one per cent in early trade on Thursday and Hong Kong's Hang Seng was about two per cent higher.

Most other markets in the region were also in positive territory following a modest gain in US stocks.

But Wednesday's trading on Wall Street was volatile, with the Dow Jones industrials giving up an early rally of 200 points to close just 89.84 points or 1.17 per cent higher.

Stock market investors were shaken following an auction of US treasury bonds that some said could push up mortgage rates and hold back economic recovery.

And the currency markets were stunned by an apparent gaffe by Geithner amid debate on China's suggestion that the US dollar be replaced as the world's reserve currency by a new common currency.

Dollar 'tailspin'

Joel Kruger of Forex Capital Markets said Geithner sent "the dollar into a tailspin after saying that he was 'quite open' to China's suggestion of moving to an [International Monetary Fund]-linked currency system".

"However, minutes later Geithner was quick to mitigate impact from the comments after reaffirming the dollar's place as the world's reserve currency for a long time to come".

Still, the Dow Jones' closing figure of just under 7,750 points is an 18 per cent rally from its low point on March 9.

Adding a note of caution, Song Seng Wun, an economist with CIMB-GK research, told Al Jazeera that any celebrations were probably premature.

"We are not quite sure if this is sustainable because numbers are still volatile. Numbers coming out from the United States may, to some effect, reflect the Obama effect," he said.

"The underlying labour market is not improving and that will lead to consumption being curtailed further down the road and spending being cut."