The European Union (EU) leaders have agreed to more steps to avert a repeat of the banking crisis and backed the creation of a European system of financial supervisors, but gave them only limited powers.

The International Monetary Fund (IMF) said next year might deliver stronger growth than earlier forecast, adding to a run of better economic news.

The agreement, outlined in a draft summit declaration, followed US President Barack Obama's announcement on Wednesday of what he said was the biggest reform of US financial supervision since the 1930s.

In the draft declaration, the leaders said: 'The European Union, like the rest of the world, still faces the effects of the deepest and most widespread recession of the post-war era.

'It is imperative for the EU to continue to develop and implement the measures required to respond to the crisis.'

Obama and other world leaders have vowed to crack down on the economic malfeasance many say exacerbated the crisis.

The IMF suggested it may lift its growth forecast for next year for the world economy, adding to the recent run of upbeat economic news that has cheered investors.

But it steered clear of suggesting signs of slowing economic decline amounted to a recovery.

'After an unprecedented global economic contraction ...signs are emerging that the rate of output decline has moderated,' IMF first deputy managing director John Lipsky told a conference in Turkey.

'I expect that in the coming weeks we will revise our growth projections modestly upward, mainly with regard to 2010,' Lipsky said.

Analysts warned that sentiment remains fragile.

'We still have not seen economic data that indicated an economic expansion has taken hold,' said Michael Sheldon, chief market strategist at RDM Financial in Connecticut, who warned of a pullback in prices over the coming weeks.

The IMF is scheduled to present updates on July 7 to its April forecast for the world economy to contract 1.3 per cent this year in the deepest post-Second World War recession.

There were more signs that the trillions of dollars governments around the world have poured into economic stimulus have provided somewhat of a safety net.

Global steel production edged up last month from April after going into a nosedive late last year when demand for new buildings and manufactured goods collapsed. The fall in shipments to China - widely viewed a driver of any world economic recovery - was the smallest since January.

In Britain, where the bursting of a house price bubble has deepened economic pain, homebuilder Taylor Wimpey said the market has stabilised in the past six weeks and it might increase the number of new sites in the second half.

Mexico's central bank cut its key interest rate by 50 basis points to 4.75 per cent and said its easing cycle is nearly over as signs of improvement in the economy emerge. – TradeArabia News Service