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What a Week: Japan, Libya, Fed, G7 Send Markets on Wild Ride

Aaron Task
Daily Ticker

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An extraordinarily dramatic week is ending with a bit of relief, however tenuous, on both the market front and in the latest news from Japan and Libya.

On Friday, the Dow rose 0.7% to 11,858, leaving it down 1.5% for the week but about 300 points above Wednesday's intraday low.

Any effort to recap this week is destined to prove insufficient, but here is a review of the major developments as of midday Friday:

Japan Crisis: The tragedy in Japan continues to unfold with a deepening nuclear crisis following last week's earthquake and tsunami. As the horrifying death toll continues to rise and survivors face fear and uncertainty amid the worst disaster Japan has seen since World War II, Prime Minister Naoto Kan said Friday morning the situation at the Fukushima Daiichi nuclear power plant is "very grave." The severity level was upgraded to level 5, the same as Three Mile Island, for reactors No. 1, 2 and 3, but partial power will hopefully be restored this weekend. (See: Japan Crisis: Hope, Fear and Nuclear Uncertainty)

In response to the crisis, the G7 intervened to weaken the yen, helping the Nikkei rise 2.5% Friday and pare its weekly loss to 10.2%. The G7 intervention helped boost emerging market stocks and other "risk" assets Friday, while concern and uncertainty about fiat currencies drove investors into gold.

Mid-East/North Africa: Oil prices surged Thursday as forces loyal to Gen. Muammar Qaddafi pressed further into rebel-controlled territory in eastern Libya. Crude spiked again early Friday after the U.N. approved a "no-fly zone" and France said air strikes were "imminent." Futures then reversed after Libya's foreign minister declared a ceasefire, although U.S. Secretary of State Hillary Clinton urged caution.

Meanwhile, government forces attacked protesters in Yemen, and Saudi King Abdullah announced more financial aid to help shore up support at home and quell Shiite protests in neighboring Bahrain.

Europe: A Moody's downgrade of Portugal and a lack of consensus over new bank stress tests revived fears about Europe's debt crisis. So did ECB President Jean Claude Trichet's renewed pledge to raise rates, despite the economic impact of Japan's crisis.

U.S.: Last, but not least, traders this week dealt with the Fed's declaration to stay the course on QE2, as well as a distinctly mixed batch of economic data. A combination of weak housing starts and consumer confidence data, along with higher than expected CPI and PPI, point to a "stagflation"-type environment.

For the markets, the biggest U.S. development this week was the Fed's decision to allow big banks to start paying dividends again. The decision comes three years after Bear Stearns' near collapse and take-under by JPMorgan, the first major domino to fall in the great credit crisis of 2008.

JPMorgan and Wells Fargo increased their dividend payouts and announced buyback plans while Goldman Sachs increased its dividend and said it would buyback $5 billion of preferred stock sold to Warren Buffett's Berkshire Hathaway in September 2008.

Meanwhile, Congress approved another continuing resolution to fund the U.S. government until April 8. But huge political obstacles remain before a full budget can win passage, including a vote on the U.S. debt ceiling, which is rapidly approaching. (See: Enron Accounting: D.C. Politicians "Just Wasting Time" on Budget, BU's Kotlikoff Says)

In the accompanying video, I discuss this week's events with my new colleagues Jeff Macke and Matt Nesto, co-hosts of Yahoo Finance's new program, Breakout.

Investment Opportunities

Macke and Nesto both see trading opportunities created by the wild swings this week, particularly in names and groups like Japanese multinationals and U.S. uranium producers hardest hit by the nuclear disaster in Japan.

See the links below for a sneak preview of what to expect from Breakout, which is set to launch Monday and is designed for active traders and investors. In conjunction with Breakout's launch, Tech Ticker will soon be changing its name to The Daily Ticker. As we've done for the past three years (!), we'll continue to cover the most important business stories of the day -- the economy, investing, corporate trends, and economic policy and politics. Stay tuned!

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