Jim O’Neill, Chairman, Goldman Sachs Asset Management.

I spent most of this past week in New York, and to my slight surprise, there appears to be some shift in the mood about the state of life. Whether this is because it is the start of the year, asset prices have been perkier, or there is some recognition that the US economy and other parts of the world are not as bleak as the second half of 2010 is not so clear. It was certainly quite nice to hear and, in my judgment, is more reflective of what is going on.

The US improvements.

I have talked in many Viewpoints since last August that I thought the US recovery would be stronger than people realized.  Most of the additional data being published gives fresh support to this view. A renewed drop in weekly job claims and some further better-than-expected housing data occurred this week. These releases coincided with more signs from the business world and beyond that the economy may be improving. Four different areas pricked up my ears. The first is repeated evidence of a pick-up in commercial bank lending from their Q4 results and, with it, the reported money supply from the Fed. The second is a changing mood about the housing market, in addition to a better tone of some of the data. Third, there is a lot of growing marginal evidence about US manufacturing becoming more competitive, including another interesting story in the US edition of the FT on Wednesday. And fourth, there is considerable talk about the rapidly-improving domestic energy supply situation in the US which, in itself, is helping boost the domestic industrial plans of some of corporate America. All four of these items were things I suspected were happening, but it was quite refreshing to hear so much talk about them.

About the only thing left to sort out is the staggering amount of wasted time one encounters going through passport control at JFK these days...

I continue to believe that the consensus on the 2012 US outlook needs to get a bit cheerier since most professional forecasters have not yet captured this mood. There is a view that much of the improvement has been seasonal. While possible, I have increasing anecdotal evidence and belief to suggest it is more. We are still forecasting 2.5 pct real GDP for 2012 at GSAM, which is above consensus. Outside the US.  China.

The mood I encountered about the world outside the US wasn't quite as dreadful as I had heard on previous visits, with a couple of people telling me that the ECB's 3-year LTRO was a "game changer". More on that in a minute.  In addition, I didn't hear quite as much passion about the Chinese hard landing view either. This might be because on Tuesday, the Chinese stock market enjoyed its largest one-day rally in a long time, coinciding with a set of much better-than-expected economic reports and talk of forthcoming monetary easing. This week's Economist has a very interesting piece about the latest Chinese data, suggesting that the share of consumption in GDP might have started to pick up. As I have maintained as the number one global topic for this year, if China can combine "slower" growth with a rising consumer, a softer external surplus and lower inflation, this is as close to nirvana as you might get. As the Economist piece suggests, there are some strong hints of this already in the Q4 GDP report. While China's GDP at 8.9 pct was its weakest quarter for over 2 years, it was better than expected.  And, while we have sketchy details, the trade surplus ended the year barely above 2 pct of GDP and the latest retail sales were above 18 pct.

One other point for all the China bubble watchers out there. Official Chinese estimates now show that just over 50 pct of the population is urbanized. Based on most people's estimates, including work I have been involved in, it is likely to move to 70 pct before one can assume China is urbanized. This involves around another 200 million people moving into cities. Quite how there is supposed to be a nationwide house price bubble with this prospect ahead I have no idea, but many don't seem to appreciate this. Moreover, as I pointed out at the GS macro conference where I spoke, in complete contrast to the US, Chinese house prices have reversed in the past 18 months because policymakers deliberately stopped them from rising. At some point, when they reverse policy tightening, the house price "problem" will turn out to be not as big a deal as so many fear.

Linked around Chinese developments, as I showed in the one slide that I was allowed to show at the macro conference, the rising power of the 8 Growth Market economies will actually boost the world economy's growth potential this decade to somewhere close to 4.5 pct, not the grim world most believe in.

A couple of other things caught my eye in this context this week. Indonesia had its credit rating revised back to investment grade by Moody's this week, only 14 years since it was revised down to junk. (There is hope for Portugal and Greece too eventually.) And another FT story I saw suggested India, disappointed by 7 pct growth - close to the rate we assume for the decade - is considering a large public sector stimulus. And Europe?

It was a better week for European markets again, despite the S&P downgrades and occasional fears about Greek debt restructuring. Some of this appears to reflect the changing appreciation of the 3-year LTRO that the ECB undertook in December, another of which is coming in February. As mentioned above, a couple of people I spoke to seem to think this is a possible "game changer". While it obviously can't solve deep fundamental issues facing Euro Area economies, it certainly has dramatically reduced the chances of a systematic banking crisis and, in the process, cut the vicious circle between that and sovereign debt holdings, and in addition, greatly reduced the risk of contagion beyond Europe. I am somewhat baffled as to why so many people still worry about this risk now. I saw a presentation while I was in NY that considered various risk scenarios around a central growth forecast for the US a touch below our official one. It contained a probability of a banking crisis of 25 pct - linked to Europe - and just 10 pct for "normality" for the US, or growth back at 3 pct. I cannot see this risk being anything close to this in the next 3 years.  In my view, because of the LTRO, it can't be much at all.

On top of this, we had another impressive performance from Mario Monti, the new Italian PM this week. In addition to presenting a number of important supply side structural reforms, he took to giving the FT a most interesting interview this week. In addition to being one of the few leading policymakers who wasn't moaning about credit rating agencies, he suggested that lots of changes and reforms are necessary. The most interesting part was reserved for his suggestion that Italy needed some kind of "reward" for its efforts to get its fiscal house in order, which follows up the previous week's suggestion that the ECB can relax as and when the so-called Fiscal Compact is agreed, possibly at the end of the month.

Both of these forces suggest to me that the improved performance of the Italian bond market makes a lot of sense, and I suspect it is set to continue.

There are plenty of things that can still go wrong, but it is true that, apart from the above, the European markets have started the year in better shape despite the widespread credit downgrades, all the fears about the French election and, of course, the uncertainties surrounding Greek debt talks.

I am wondering whether it is because there is also some acknowledgement that the German economy is not only holding up better than the worst case scenarios, but it is also adjusting more to stronger domestic demand. I heard one of the better ex ECB board members this week suggest that this was happening, citing the easiness of German financial conditions and apparent evidence of a strengthening construction sector. As he suggested, this is actually how the EMU can and should work as the system adjusts. Markets and What Can Go Wrong?

Given that the successful passing of the 5-day S&P rule has transferred into apparently the market's best start since 1987 (let's not worry about the October factor that year for now), and there are continued signs of less intense correlations across asset classes, it all feels rather nice for those of us who have maintained a more cheery view of the world.

My comments last weekend regarding Japan, its debt, JGBs and the Yen got picked up on quite a bit at the macro conference and one or two people are starting to think that "this may be the year". Certainly, if the Yen were to move back above Y78.30-ish, I suspect quite a few might want to explore that idea. As I wrote and said at the event, looking out over the next couple of years, this is a lot more interesting now than the European story.

Trying to maintain my emphasized fresh 2012 focus, I think we need to watch the flash European PMI's in the week ahead to see whether the macro picture is stabilizing as December suggested or whether it was just a temporary factor.  And, of course, the early February data the week later will be most interesting in terms of global trade patterns at the start of the year (Korea's first 20 days of January looked a touch softer, but let's see the whole month.) The GS Advance Leading Indicator for January shows further signs of improving global momentum, which is good to see, so let's see if it is maintained.

When I was quizzed last week about what could go wrong, I found myself thinking in terms of the Middle East. I think I noticed during my travels that Saudi Arabia is now suggesting it wants a $100 per barrel oil price, which suggests they are struggling to finance their big boost in domestic spending. I say this, because from everything I increasingly read and hear, it seems to me as though the fundamentals for the energy markets are turning. Natural Gas prices continued to drop in the US last week linked to the remarkably rapidly shifting US supply and demand changes, and the IEA is revising down its estimates of global oil demand. The implied consequences for energy prices is obviously good, but if this is where things may head, some countries that have gotten used to constantly rising prices are in for some challenges. (Russia is obviously one of these countries, which is why Putin needs to deliver on his frequent suggestions of shifting the balance of their economy.)

Beyond this, it seems to me that there are so many exciting things going on, lots of focus on changing equity and bond market benchmarks and so on. We have done a lot of work on the equity benchmarking issue, and I am increasingly thinking we need to turn our attention to bond market benchmarks now too.

You may be pleased (or not) to know that I won't be writing a Viewpoint next weekend as I shall be in Prague.  Some big football matches in the UK this weekend, also exciting, at least ahead of them!

Charles E. Ryan. Chairman, UFG Asset Management

 By Andrei Skvarsky.

UFG founder Charlie Ryan has sealed his reputation as the most successful foreign banker in Russia ever by clinching a deal which nets him a fourth payout from Deutsche Bank. The American banker, who oversaw Deutsche Bank’s Russian operation from 2005 to 2010, is selling Deutsche the remaining 60% stake in UFG’s Capital Management unit that the German lender does not own.

A Harvard graduate, Ryan first came to Russia in the early 1990s as a banker for the European Bank for Reconstruction and Development (EBRD) when he landed in St Petersburg to help advise the local authorities on how best to privatise local municipal assets. One of his key initial contacts in the mayor's office was one V. V. Putin, who was deputy mayor at the time to Anatoly Sobchak.

Spotting a gap in the market, Ryan and a partner Boris Fedorov decided to strike out by setting one of  the country's first ever investment banks.

``Charlie has had the intelligence to understand the Russian political and economic context before positioning, and to pick his partners well,'' commented Eric Kraus, an independent fund manager in Moscow.

By Chris Weafer, Chief Strategist at Troika Dialog.

“Money is better than poverty, if only for financial reasons”

Woody Allen Relief at political changes. Markets finished last week with a palpable sense of relief that the political crisis in Europe has been contained and that this may allow for a more determined effort by the new administrations in Greece and Italy to deal with the debt issues.

Nobody can take for granted that the crisis has now been resolved, far from it, but there is greater hope that the worst has passed for now and the “can” firmly kicked into 2012. Coupled with the EU political relief is also the greater sense of optimism that recession in the US can be avoided as recent macro indicators show modest but positive improvement.

The key day to validate or dent that renewed optimism this week will likely be Tuesday as important US and EU data will be updated. Still, given the volatility seen since early summer and the propensity for surprises, the prudent approach remains one of caution even as the respective Greek and Roman Gods of happiness smile on markets at the start of a new week. Better start in Asia. Asian markets reflected the renewed sense of optimism with a strong start to

By Andrei Skvarsky.

Two senators have urged Secretary of State Hillary Clinton to consider banning entry into the US for two senior Russian police officials who are believed to be complicit in the death of Hermitage Capital lawyer Sergei Magnitsky.

Earlier, the State Department put dozens of Russian officials blamed for Magnitsky’s death on a no-visa list after Russian authorities refused to take action against them.

Generals Tatiana Gerasimova and Nikolai Shelepanov, senior figures in the Russian Interior Ministry’s criminal investigation arm, are planning a visit to Washington to discuss intellectual property rights.

They will, however, end up on the visa ban list under recent US human rights laws if the initiative of Senators Roger Wicker and Benjamin Cardin goes through, according to a statement from Hermitage.

Magnitsky was arrested on a tax evasion charge after launching an investigation into an alleged $230m tax fraud in government. The gravely sick 37-year-old man died in a Moscow remand jail two years ago after being denied essential medical care.

Russian authorities launched a low-key probe into his death last summer, but weeks later came up with resuscitated posthumous tax evasion proceedings against him.

Another step towards WTO. Russia and Georgia signed a bilateral agreement in Geneva yesterday that removes a major obstacle to Russia’s entry into the WTO in mid December. The Russia-WTO working group meets in Moscow today and tomorrow and is expected to also finalize outstanding issues ahead of the December Council meeting. Also in Moscow today (or tomorrow) Prime Minister Putin will meet with members of the Valdai Club and is expected to emphasize Russia’s determination to improve investor and business conditions in the country. Elsewhere today, the weekly US jobless claims report can often affect investor sentiment. The ECB publishes its monthly economic report for November and that will hardly provide any encouraging words for investors. ENRC will publish 3rd Qtr production data.

Trading – Moscow: Moscow’s bourses yesterday opened with a net gain as a reaction to the encouraging Chinese inflation and macro data. But, as was the case everywhere, the mood quickly changed as Italian bond yields rose. Both MICEX and the RTS slid through the session for the former to end 4.2% lower and the latter to finish with a loss of 3.3%. Sberbank was the best of the blue chips in recent sessions so not surprisingly took the brunt yesterday. It’s shares lost 6.6% on MICEX. VTB ended 4.1% down. Another reason for bank sector weakness is the fear that the ruble will reverse its recent positive course in the face of global risk aversion. Yesterday the ruble just about held onto a gain (+1 basis point) against the dollar as the MICEX session closed.

By Andrei Skvarsky.

The New York Stock Exchange last week hosted a conference that purported to give US investors a window into Russia’s capital markets and business environment.

The forum, Russia Business and Investment Summit, brought together top executives in financial services, mining, manufacturing, energy and other industries.

A variety of Russian companies were represented, including VimpelCom, Novatek, RUSAL and Uralkaly, according to a statement from emerging markets communications firm PBN.

A delegation even got to ring the famous bell to mark the close of trading.

By Andrei Skvarsky.

Canada is considering joining the United States in denying entry visas to Russian officials blamed for the death in jail of Hermitage Capital fund lawyer Sergei Magnitsky.

“The ongoing impunity, and indeed, in this instance shocking impunity regarding Russian officials is as scandalous as it is shocking,” Irwin Cotler, a member of Canada’s Parliament, said in introducing a bill to the legislature that would slap a visa ban on the officials’ families as well as on themselves.

 “This legislation will uphold the rule of law, will assure Russian human rights defenders that they are not alone, will protect Canadian business interests in Russia, and in particular will remember and honour the heroic sacrifice of Sergei Magnitsky,” Cotler said. “He acted on behalf of all of us in his protection of the rule of law.”

Earlier, officials implicated in the Magnitsky case came under a US visa ban, and the European Union is mulling visa sanctions as well.

In a tit-for-tat response, Moscow came up with a list of American officials to be denied entry to Russia.

By Eric Kraus, author of the Truth and Beauty (and Russian Finance). The good news is that we have a ringside seat for the decline of the West… the bad news – we are inside the ring! The miserable thing about being a seer is that when you get it right – no one remembers – when wrong, not one forgets! Actually, it may be worse to get it right since what seemed bold and provocative predictions a decadeago – the secular rise of China, the birth of a multi-polar world, the Malthusian struggle for resources – become banalities so widely held that one no longer dares reiterate them for fear of ridicule. When not totally distracted by the flashing of electronic digits on an LCD screen, T&B has been known to muse on some of the Great Questions – inter alia: “Why here?”; “Why now” (i.e. at this particular time in a 14 billion-year history); “are we approaching a discontinuum...?” If, very unexpectedly, we find any definitive answers tonight, we shall include them in an appendix. For now, suffice

By Andrei Skvarsky. France’s BNP Paribas is considering a partial buyout of a Russian subsidiary of US-based investment manager Pioneer Investments from Italy’s UniCredit. TKB BNP Paribas Investment Partners, a firm controlled by the French lender and Russian railways monopoly RZD, would take over three funds with total assets of 998m rubles ($31.4m) from Pioneer via the potential deal, according to Russian newspaper RBC Daily. Pioneer would meanwhile continue to manage several pension funds with which it has contracts expiring in spring 2012 and to look after private money some of which belongs to UniCredit clients.

By Eric Kraus, author of Truth and Beauty (and Russian Finance). The major story is, of course, the return of Vladimir Putin to the Russian presidency – an outcome which we always thought likely given that Medvedev seemed a deeply counterintuitive choice for the Russian presidency. Totally lacking in charisma and with no experience of politics, he was singularly unsuited to lead a country like Russia – with its long history of personalization of power.

By Andrei Skvarsky.

Bank of America Merrill Lynch has announced it “is strengthening its infrastructure” in Russia and is going to make “strategic hires”.

Moving to new offices in central Moscow is part of BAML’s expansion in Russia, according to a statement by the bank, which recently dismissed one of its top Moscow-based managers, Sergey Babayan, as part of a staff cuts scheme.

“We continue to make strategic hires in Russia as we look to invest in our Russia business and grow market share in the coming months and years,” said Konstantin Korishchenko, chief executive of BAML’s Russian subsidiary, Merrill Lynch Securities.

By Marcus Williams.

Russia's Otkritie Capital has recruited J.P. Natkin from French bank Credit Agricole as director of equity sales for its new Wall Street office.

J.P. Natkin, a Russia veteran with over two decades of experience, worked in Russia for the Australian resource venture capital group Vanguard Petroleum.

Most recently, he served as a managing drector at Credit Agricole Cheuvreux, where he was head of emerging market sales and head of client services in New York. 

Otkritie said it is hiring at least ten bankers for its new US office headed by Luis Saenz.