The Weekend Wrapup 12.3.11

Americas:

• Wall Street hit its biggest week since March ’09 when the DOW surged 7%, the S&P 7.4%, and the NASDAQ 7.6%, bringing November into positive territory after the past week's bloodbath.

• The Fed cut liquidity swap rates to OIS +50 bps, making it easier for Central Banks around the world to grab dollars should shit hit the fan.

• S&P downgraded 37 banks.

• Economic data showed signs of improvement, most notably with the jobs report. You guys had a good discussion about it and I totally agree that this doesn’t reflect the reality of things with job growth being constrained and all but, job creation does seem to be growing legs. That said; real wage growth declined, average unemployment duration is at new high, and the unwavering ugliness of the housing sector is keeping the big picture kinda gloomy.

Europe:

• European indices also surged this week as the FTSE posted its best performance in 3 years, rising 7.4%. Germany’s DAX jumped to 6117.73 points while France’s CAC gained 1.2% to end the week at 3167.31.

• European bonds also rallied after a successful French and Spanish auction coupled by the Fed’s rate chop sent yields down across the board. Italian 10-year yields fell 58 basis points over the week to 6.68 percent, Spanish 10-years fell 1.02%, while German Bunds rose, cutting the French – German bond spread down below 100 bps as French 10-years yield 3.18%. Portuguese yields however, are rising steadily.

• There’s been a lot of talk from the Eurocrats this week, but what really matters is what’s on the plate next week: Italy’s austerity package will be on the spotlight Monday, Swiss CPI will be up on Tuesday, followed by the ECB’s dollar auction Wednesday, then an ECB meeting on Thursday, ending with the uber-important EU summit on the 9th. Let’s see if they can finally get down to business.

Asia:

• Asian markets were mixed with the Nikkei up 6%, the Hang Seng up 8%, while Shanghai, SoKor, and Singapore dropped 1.4%, 0.1%, and 0.7% respectively at the close. Australia’s ASX was also a gainer while India posted its best week in two years, gaining over 7%.

• China cut their reserve ratio requirements to aid the “soft-landing.” The cut was viewed as a huge positive but after-hours things started to go sour; reports showed that Chinese manufacturing contracted for the first time since ’09, signaling a slowdown for the sector while the property market was reported to be “critical.” Meanwhile in eastern China’s Anhui Province, a deformed pig walks on its front legs!

That’s it for me monkeys, here’s my clip of the week:

Here's Charlie Rose interviewing investment legend Seth A. Klarman. The first half's pretty much him talking about his non-profit but it gets better afterwards as he talks about his infamous book "Margin of Safety" as well as his investment style. Enjoy.

An Interview with Seth Klarman and Charlie Rose from Facing History and Ourselves on Vimeo.