The first-quarter earnings season is sparking some excitement in the market, and due to low analyst expectations and a drop in trading volume, those stocks that can significant beat their first-quarter earnings expectations are enjoying the narrowing market and surge higher. As a result, I remain especially excited about the appreciation potential this earnings season for our Global Growth stocks.

Despite a great start to the first-quarter earnings announcement season, the stock market consolidated last week due to fears emanating from Europe. Bond yields in Italy and Spain have resumed rising as sovereign debt fears have resurfaced. Now that some European countries have fallen back into a recession, with at least two negative quarters of GDP growth, some market observers do not believe that Italy, Spain and maybe Portugal’s growing debt burdens will further contract economic growth. So even though the European Central Bank (ECB) recently flooded Eurozone banks with cheap three-year loans at 1% and caused banks to buy high-yielding Italian and Spanish debt in apparently the biggest-ever arbitrage trade, economic fears are now back on the rise.

I should add that the French Presidential election may help signal the direction Europe is heading, since all the candidates are proposing higher taxes. Right now, it looks like a two-man showdown between the Socialist candidate, Francois Hollande, who is proposing 75% taxes on the wealthy, and current President Nicolas Sarkozy, with Hollande as the overwhelming favorite to likely become the next French President.

Just so you know, unlike the U.S., French residents can leave the country and no longer pay taxes, even though a worldwide tax (like the U.S. has) is also being proposed, but it is not being taken seriously, since the French are masters at avoiding taxes and can flee to Monaco and other nearby tax havens.

While I am covering the world, China announced that its first-quarter GDP growth slowed to an 8.1% annual rate, the slowest pace in the past 11 quarters, largely due to slower export growth and lower construction activity. The primary reason that construction has slowed is due to soft housing prices and less infrastructure spending. And China’s exports grew at a strong 7.6% annual pace, though down from their prevoius double-digit growth.

The good news is China’s domestic spending is becoming a bigger factor in its GDP growth as retail sales rose at a 15.2% annual pace, up from a 14.7% annual pace in the previous two months. China’s imports continue to grow at a faster pace than its exports, due to the fact that a growing middle class is craving imported goods. Overall, the details of China’s GDP report paint a picture of a much more balanced economy that should be able to sustain steady economic growth.

Here in the U.S., it’s looking a bit better—even though President Obama is campaigning on higher taxes, at least they are not at a France’s proposed 75% rate yet! In addition, GOP candidate Mitt Romney is already reminding voters that the U.S. now has the highest corporate taxes in the world, which is pushing more companies to incorporate elsewhere and hinders job creation.

On that subject, my favorite economist, Ed Yardini, pointed out that the job creation in the U.S. is not as bad as the March payroll report implied with only 120,000 jobs created, since the broader household survey reported a whopping 882,000 jobs in March, following a 563,000 gain in February. The household survey measures contract jobs and other jobs where workers typically do not get a W-2, so it appears that the “underground economy” and “shadow workforce” is very healthy.

The fact of the matter is the U.S. government’s economic statistics were pretty baffling last week, so let me give you some examples.

Baffling Statistic No. 1

First up, jobless claims rose by 13,000 in the latest week to 380,000, which is the highest level since January. Also, the jobless claims from a couple of weeks ago were revised higher by 10,000, so the four-week moving average rose by 4,250 to 368,500.

Interestingly, some economists pointed out that school workers can now apply for new jobless claims due to Spring Break, even though their jobs will resume within a week or so. Filing for unemployment benefits to go on Spring Break and embark on a vacation is baffling to me!

Baffling Statistic No. 2

The Labor Department announced that the Producer Price Index was unchanged in March due largely to a 2% drop in gasoline prices! Whatever is going on at the wholesale level is clearly not showing up at the gas pump, since retail prices continue to rise.

Fortunately, the Labor Department acknowledged that there is at least some inflation out there after it reported that the Consumer Price Index rose 0.3% in March. In the past 12 months, consumer inflation has risen 2.7%, down from a 2.9% annual pace in February, so the Labor Department is painting a picture that inflation is decelerating, despite the high prices at the pump and grocery store.

Hmm, I wouldn’t expect that prices at the pump are going to go lower, especially as refineries are being shut down in the U.S. and demand soars in Brazil, China, India, Saudi Arabia and other countries that are experiencing stronger GDP growth and are benefiting from a growing middle class and better demographics.

Baffling Statistic No. 3

The final amazing U.S. government report is that the U.S. budget deficit is now shrinking. The Treasury Department reported that for the first six months of fiscal 2012, the federal government’s budget deficit declined 6% to $779 billion, down from $829 billion in the same period a year earlier. For all of fiscal 2012, the Treasury is estimating a $1.3 trillion budget deficit. The lower-than-anticipated budget deficit means that the U.S. government may not run out of money in October, which would be very embarrassing to President Obama just before the November Presidential elections.

Finally, we did have a few more reliable economic reports last week—the Fed announced that its Beige Book survey of the 12 Fed districts reported that economic growth was “modest,” citing unusually that warm weather and an early Easter helped boost retail sales. Strong March auto sales were also cited as another reason for improving economic growth.

In addition, the other believable economic report last week came from the University of Michigan/Reuters on Friday when they announced that their preliminary reading for consumer sentiment in April declined to 75.7 down from 76.2 in March. Rising gasoline prices is clearly weighing on consumer sentiment, but Americans are optimistic folks because the University of Michigan/Reuters expectations index actually rose to 72.5 in April up from 69.8 in March.

That’s all the news for this week.