Yesterday, just in time for interview season, we tried to stump you with 10 Wall Street Interview Questions That Will Make You Feel Like A Fool.
Naturally, we didn't give you the answers right away, we wanted you to take the time to scratch your head and figure them out.
Hopefully, you're done by now. If not, we're sorry, your time has run out. Better luck next time.
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FITCH DOWNGRADES GREECE: 'Default Is Highly Likely In The Near Term'
AP
Fitch just downgraded Greece to C from CCC, putting the debt-laden country deeper into junk territory.
The action follows news that European leaders agreed on terms allowing for Greece to receive its second bailout.
Fitch's action is tied to the terms of the Greek sovereign debt swap. Here's what they wrote:
In Fitch's opinion, the exchange, if completed, would constitute a 'distressed debt exchange' (DDE) in line with its criteria and consequently yesterday's announcements set in motion the agency's process for reviewing Greece's issuer and debt securities ratings. The sovereign IDR has accordingly been lowered to 'C' from 'CCC' indicating that default is highly likely in the near term. The ratings of the securities subject to the exchange have also been lowered to 'C' from 'CCC'...
Fitch considers that the proposal to reduce Greece's public debt burden via a debt exchange with private creditors will, if completed, constitute a rating default...
Here's Fitch's announcement:
Fitch Downgrades Greece to 'C' from 'CCC'
22 Feb 2012 6:33 AM (EST)
Fitch Ratings-London-22 February 2012: Fitch Ratings has downgraded Greece's Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'C' from 'CCC'. The Short-term foreign currency rating is affirmed at 'C'. The agency has also affirmed the euro area Country Ceiling at 'AAA', which is applicable to all euro area member states.
The downgrade follows yesterday's Eurogroup statement on a second financing programme for Greece including 'private sector involvement' (PSI) and a subsequent announcement from the Greek authorities outlining the terms of the proposed exchange of Greek Government Bonds (GGBs). The rating action is in line with Fitch's statement on 6 June 2011, which outlined its rating approach to a sovereign debt exchange (see 'Fitch Outlines Rating Approach to a Sovereign Debt Exchange').
The Eurogroup communique acknowledges that a common understanding has been reached between the Greek authorities and the private sector on the general terms of a 'private sector involvement' (PSI) exchange offer, including a nominal haircut of 53.5% to the face value of GGBs. The subsequent statement from the Greek authorities expands on the terms of the debt exchange and confirms the Greek government's intention to introduce collective action clauses (CACs) into those GGBs governed by Greek law.
In Fitch's opinion, the exchange, if completed, would constitute a 'distressed debt exchange' (DDE) in line with its criteria and consequently yesterday's announcements set in motion the agency's process for reviewing Greece's issuer and debt securities ratings. The sovereign IDR has accordingly been lowered to 'C' from 'CCC' indicating that default is highly likely in the near term. The ratings of the securities subject to the exchange have also been lowered to 'C' from 'CCC'.
Fitch considers that the proposal to reduce Greece's public debt burden via a debt exchange with private creditors will, if completed, constitute a rating default, and result in the country's IDR being lowered to 'Restricted Default' ('RD') upon completion. The ratings of GGBs affected by the exchange, including those not tendered but restructured under CACs, which are expected to be imposed retrospectively on bonds issued under Greek law, will also be lowered to 'D' ('default') at this time.
Shortly after completion of the exchange with the issue of new securities, Greece's sovereign rating will be moved out of the 'RD' category and re-rated at a level consistent with the agency's assessment of its post-default structure and credit profile.
Fitch regards the imposition of retrospective CACs as a material adverse change in the terms and conditions of GGBs in the context of an imminent debt exchange and confirms its assessment that the exchange will be distressed and de facto coercive on private holders of Greek bonds. Nonetheless, the primary credit event is the exchange itself and Fitch will rate Greece and its securities accordingly.
You Do Not Appreciate How Much Taxes On Rich People Are About To Go Up...
AP Fair share, baby. Fair share.
There has been a lot of fighting about the possibility of raising taxes on the highest-earning Americans.
There has also been frustration about how much President Obama's healthcare plan will eventually cost Americans, especially high-income Americans.
And there have been fisticuffs over the expiration of the " Bush tax cuts," which have now been in force for so long that most people have forgotten what life was like before them (in part, a federal budget surplus).
Until recently, however, these concerns have seemed academic--something that might happen happen at some point in the distant future.
Well, that future is almost here.
Andrew H. Friedman of Eaton Vance recently summarized the tax changes that will take effect in 2013, about 10 months from now.
The changes reflect the double-whammy of the new healthcare tax (3.8% on dividend income and other forms of unearned income) and the expiration of the Bush tax cuts. The combination of the two is startling, even for those who support raising taxes for rich people.
Importantly, these tax changes are already a matter of existing law. To prevent them from taking effect, Congress would have to agree to stop them from taking effect.
What's the bottom line on these changes?
Americans who earn more than $200,000 a year ($250,000 for families) are about to pay the highest taxes they have paid in a quarter-century, since the late 1980s. The top tax bracket on ordinary income will jump from 35% to 40% (or higher in the case of the self-employed). The tax rate on dividends, meanwhile, will leap from 15% to 43%.
Here's Andrew Friedman:
Republicans believe the Bush tax cuts should be extended for all taxpayers. Democrats believe they should be extended only for the middle and lower classes. President Obama has said he will veto any further extension of the Bush tax cuts for upper income families. If the President carries through on that threat, then either the Republicans must accept a compromise that raises taxes only on the affluent or watch the tax cuts expire for everyone. Under either scenario, affluent taxpayers will face higher taxes in 2013.
And that is not the end of the story.
To help finance the health care reform law passed in 2009, Congress approved a new tax on investment income to take effect in 2013. Beginning next year, families whose overall income is above $250,000 (individuals with income over $200,000) will pay an additional tax of 3.8% on taxable investment income (e.g., interest, dividends, capital gains, rents, royalties). This additional tax will not apply to non- taxable income, such as tax-exempt municipal bond interest, or to amounts withdrawn from qualified pension plans and IRAs.
When the new tax under health care reform is added to the expiration of the Bush tax cuts, in 2013:
- The top tax rate on ordinary income will rise from 35% to 43.4%—an increase of almost 25%*
- The top tax rate on capital gains will rise from 15% to 23.8%—an increase of almost 60%
- The top tax rate on dividends will rise from 15% to 43.4%—an increase of almost 200%
- The estate tax exemption will drop from $5 million to $1 million and the estate tax rate will rise from 35% to 55%—an increase of over 55%
Most important, Congress need not pass a single piece of tax legislation in 2012 for these tax rates to take effect in 2013. They will happen by default.
SEE ALSO: THE TRUTH ABOUT TAXES: Here's How High Today's Really Are
*UPDATE: Several sharp-eyed readers say that Friedman's calculation on ordinary income here is wrong. The top ordinary income bracket will increase to 39.6% (40%). The healthcare tax will then be applied to dividend income. Apparently, in the case of the self-employed, the healthcare tax will have the effect of raising the ordinary income tax to the 43% that Friedman cites. If anyone can explain the specific details of this, please do so in the comments below.
Boeing's Flagship Plane Has An Issue
The Boeing 787 Dreamliner had a lengthy gestation period which was coupled with a number of production delays.
And now it appears another issue has arisen.
According to Reuters, the carbon fiber fuselage of the 787 is experiencing issues related to shimming.
Shimming is a process that plane manufacturers use to fill tiny cracks that may occur when a plane is being built. Reuters reports that the issue with the shims has caused support structures in the rear of the plane to lose laminate.
The 787s next-generation, lightweight, materials may be to blame for the issue. All 55 planes that have been delivered may be susceptible to the problem.
Thankfully, Boeing has said that this is an easy issue to fix, but they are anticipating short term delays delivering planes currently on the assembly line until the issue is corrected.
Reuters also notes that Boeing is exploring a stretched variant of the 787, to be dubbed the 787-10. This will fit an additional 40 passengers at the expense of some of the plane's range.
Now take a look at what Boeing engineers do in their spare time >
ANSWERS: 10 Wall Street Interview Questions That Will Make You Feel Like A Fool
And he gave us an equally long answer:
The answer is actually b, despite the unintuitive answer for anybody who doesn't understand conditional probability. The key is that the bullets are placed in adjacent chambers. Because this is a relatively tractable problem, we can illustrate this with a stylized diagram. Suppose " B" stands for a bullet and " _" stands for an empty chamber, these are the following possible configurations for the revolver (without loss of generality, assume that the first trigger pull comes from the first chamber):
B B _ _ _ _
_ B B _ _ _
_ _ B B _ _
_ _ _ B B _
_ _ _ _ B B
B _ _ _ _ B
Given that he didn't die, cases 1 and 6 are ruled out, so the remaining cases are 2 through 5. If we do not spin, the revolver advances to the next chamber, and case 2 is the only one where you would face certain death. Hence your survival rate is 75% if you choose not to spin.
If you choose to spin, you instantly reset the probability of dying back to 2/6, implying a survival rate of 66.67%. Choosing not to spin is clearly the smarter move.
If we extend this problem to n bullets across k chambers with different adjacency patterns, the problem becomes a lot harder and requires more detailed knowledge about combinatorics. This particular simplified version is not very difficult by itself, but it's a clever little puzzle that can quickly screen out over half of the applicants for a Sales and Trading internship if they do not understand basic probability/combinatorics.
Source: Investment management analyst
Answer: There's no correct answer to these sales pitches per se, but the key thing in selling a product is creating need. Also remember that with these types of questions, demonstrating value through showing is much more meaningful than merely spelling it out. In this scenario, engage the interviewer's imagination by setting scenario where the phone would prove to be indispensable.
Source: S& T analyst
Answer: Jump on its back, climb up its neck, and your weight will snap its neck.
Source: Investment banking analyst
Answer: It decreases—bond convexity.
Source: S& T analyst
Think of the hot dog stand as a company—there are many ways to value firms. One option could be to look at the prices on recent deals. If there are no recent deals, try constructing a discounted cash flow model to observe cash flow and future growth. It is also key to think about and estimate how many sales a hot dog stand could do in Union Square per year, areas the stand could find growth (such as expanding into pretzel sales), the effective tax rate in New York City, margins, etc.
Source: Morgan Stanley summer analyst
How would you fight a bear?
Answer: Climb on its back and grab it by the neck so its paws can't reach you.
Source: Investment banking analyst
Source: Investment banking analyst
Refresher: Here's the question about Baye's theorem...
One analyst gave us this question: (Answer on next slide > )
1) We are playing Russian roulette, with a standard 6-chamber revolver. I put two bullets in adjacent chambers, spin, point the gun at my head, and pull the trigger. Click. I'm still alive. It's now your turn, and I hand the gun to you, and give you two choices.
Would you rather, assuming you want to live,
a) Re-spin, aim at your own head and pull the trigger.
b) Do not spin, aim at your own head, and pull the trigger.
Why?
Source: Investment management analyst
1) We are playing Russian roulette, with a standard 6-chamber revolver. I put two bullets in adjacent chambers, spin, point the gun at my head, and pull the trigger. Click. I'm still alive. It's now your turn, and I hand the gun to you, and give you two choices.
Would you rather, assuming you want to live,
a) Re-spin, aim at your own head and pull the trigger.
b) Do not spin, aim at your own head, and pull the trigger.
Why?
Source: Investment management analyst
Answer: Baye's Theorem
The answer is actually b, despite the unintuitive answer for anybody who doesn't understand conditional probability. The key is that the bullets are placed in adjacent chambers. Because this is a relatively tractable problem, we can illustrate this with a stylized diagram. Suppose " B" stands for a bullet and " _" stands for an empty chamber, these are the following possible configurations for the revolver (without loss of generality, assume that the first trigger pull comes from the first chamber):
B B _ _ _ _
_ B B _ _ _
_ _ B B _ _
_ _ _ B B _
_ _ _ _ B B
B _ _ _ _ B
Given that he didn't die, cases 1 and 6 are ruled out, so the remaining cases are 2 through 5. If we do not spin, the revolver advances to the next chamber, and case 2 is the only one where you would face certain death. Hence your survival rate is 75% if you choose not to spin.
If you choose to spin, you instantly reset the probability of dying back to 2/6, implying a survival rate of 66.67%. Choosing not to spin is clearly the smarter move.
If we extend this problem to n bullets across k chambers with different adjacency patterns, the problem becomes a lot harder and requires more detailed knowledge about combinatorics. This particular simplified version is not very difficult by itself, but it's a clever little puzzle that can quickly screen out over half of the applicants for a Sales and Trading internship if they do not understand basic probability/combinatorics.
Source: Investment management analyst
Sell me my blackberry
brianburk9viaFlickr
Source: S& T analyst
My bank wants to send me to Shanghai, but my wife refuses to move there. Pretend I'm my wife, sell the new position in Shanghai to me and convince me to move to China.
Answer: The other key thing with these pitch questions is to keep your cool and not get rattled. This one requires a few more creative assumptions, but the bottom line is " know your audience."
Talk to the interviewer by trying to engage the point-of-view of his aforementioned wife, without getting too carried away with the mannerisms and expressions you use to convey your point. It's hard not to sell anyone on Shanghai honestly, and the interviewer just wants to make sure you think things through clearly, don't freeze up under pressure, and ultimately communicate your points effectively.
Source: S& T analyst
Talk to the interviewer by trying to engage the point-of-view of his aforementioned wife, without getting too carried away with the mannerisms and expressions you use to convey your point. It's hard not to sell anyone on Shanghai honestly, and the interviewer just wants to make sure you think things through clearly, don't freeze up under pressure, and ultimately communicate your points effectively.
Source: S& T analyst
How would you kill a giraffe?
Source: Investment banking analyst
There's a 10x10x10 cube made of 1,000 1x1x1 cubes. If you get rid of the outer layer of cubes how many do you have left?
Remember, you're only getting rid of cubes on the outside layer.
Answer on next slide >
Source: Former M& A analyst
Answer on next slide >
Source: Former M& A analyst
Answer: Pretend the top layer of the cube has melted away, and you're left with...
Refresher: You have 2 buckets. One full of white marbles and the other full of black marbles. How do you allocate the marbles into buckets in a way that maximizes your probability of picking 2 white ones when you pick 1 marble from each bucket?
Logic questions are pretty standard.
Answer on next slide >
Source: Former M& A analyst
Answer on next slide >
Source: Former M& A analyst
Answer: Put one white marble in one bucket, put all the other marbles in another bucket.
Suddenly, your odds of picking a white marble have improved from 50-50 to 75-25.
Source: Former M& A analyst
Source: Former M& A analyst
What happens to bond duration as interest rates increase?
Source: S& T analyst
Question: How do you value the hot dog stand at Union Square in New York City?
This is an example of a company valuation question.
Answer on next slide >
Source: Former summer analyst at Morgan Stanley
Answer on next slide >
Source: Former summer analyst at Morgan Stanley
Answer: Study up on the basics!
Source: Morgan Stanley summer analyst
Now send the questions to the smartest person you know, see how they do.
Here's All You Need To Know About Life Insurance
Flickr / @Doug88888
About 11 million U.S. households with children under age 18 had no life insurance coverage as of 2010, according to LIMRA, a worldwide research and consulting organization for the insurance and financial services industry.
Overall, less than half of U.S. households had individual life insurance, a 50-year low.
That means if the breadwinner or the person responsible for childcare and household management died prematurely, the loss of income or need to pay for those services could push the household into poverty.
While most consumers begin thinking about life insurance when they get married and start a family, it can be wise to buy a policy even sooner, says Allen C. McLellan, associate dean and an assistant professor of insurance at The American College.
In fact, USAA Life Insurance reports that the number of single people buying life insurance is increasing, even as overall sales decline.
[See 10 Ways to Boost Your Social Security Checks.]
" A young single adult who's not married or not in a relationship certainly needs enough to pay their end-of-life expenses so their parents don't have to come in and clean up the debts," says McLellan. Single policyholders who offer financial or caregiving support to parents may want their policy to cover that need as well.
Buying a policy while you're young and healthy also means lower premiums however, older consumers may also want a life insurance policy to leave a legacy for their children or support a surviving spouse.
Whatever your age or life stage, the first step in purchasing life insurance is conducting a needs analysis. Several online life insurance calculators provide a benchmark, or an insurance agent can discuss your needs.
Seven to 10 times your annual salary is a common starting point, but many other factors come into play. " They're going to look at your ongoing expenses, your mortgage, your rent, are you paying tuition?" says Whit Cornman, a spokesperson for the American Council of Life Insurers. " Also consider immediate expenses, medical bills, burials costs, the fact that the family may need money to move if they're going to have to switch jobs."
For a spouse who doesn't work, " Consider what do you think are the costs of replacing that person?" urges Cornman. " For people who do the cooking, take care of the household, day care expenses. If they're a stay-at-home-parent, what are going to be the costs of that?"
In general, people to tend to underestimate their needs. And as Marvin Feldman, president and CEO of the Life and Health Insurance Foundation for Education (LIFE), a nonprofit that educates consumers about financial planning and insurance, points out, in this market, people need more capital to earn the same amount of interest that they did a few years ago.
[See How to Finance Life Until 100.]
Life insurance comes in many different varieties, so once you've determined your needs, an insurance agent can help choose a policy to match. Term life insurance insures you for a specified time frame, say 15 or 20 years, while permanent insurance remains in force as long as you continue paying the premiums.
Permanent life insurance is sometimes also called cash-value insurance because it can accumulate savings on a tax-deferred basis. Whole life, variable life, and universal life are all specific types of permanent life insurance.
" Term is very simple to understand," says McLellan, who compares term life insurance to paying rent. " When I stop paying the rent, I would lose the coverage. That's why many young people buy term life insurance off the Internet. Once I get into the complexities of whole life insurance or universal life, the game changes. Anything more than term is generally going to require the services of a licensed agent."
According to Amy Bach, executive director of United Policyholders, a nonprofit organization that provides insurance resources to consumers, the most commonly purchased option is a term life policy with a flat annual premium or semi-annual premium. " The problem with the term life policy," she continues, " is once the term expires, the premiums will go through the roof."
One way to handle this issue is by laddering policies. " That is, buy another policy before the end of the term so that coverage will continue," explains Cornman. " Some policies will let you continue coverage at the end of a term. You would likely pay a higher rate, but it still may be a better option than seeking out a new policy, which may be very costly or difficult to get at an advanced age."
[See How Long Should I Work Before Retirement?]
That said, life insurance may still be within reach because " companies are becoming much more efficient at keeping cost ratios down, so it's probably less expensive than it's ever been," according Feldman. " Not that finding the least-expensive price is most important."
Experts stress that whether you buy life insurance online or through an agent, choosing a reputable company with a record of good customer service is a must.
" You want to purchase insurance from a company that has a history of paying claims, that has a strong financial rating, and there are fairly easy ways of discovering these things," says Larry P. Ginsburg, an Oakland, Calif.-based certified financial planner and a board member of United Policyholders. Ratings companies like Standard & Poor can offer insights into an insurance company's financial stability.
Consumers should also be wary of insurance products that are overly complicated or over-promise.
" One of the biggest areas where consumer advocates have been working is to protect seniors who get sold these new complicated life insurance policies that are really more like investment products," Bach says. " The senior thinks they're going to see some benefit while they're alive, but they're so complicated and there are so many unknowns that it's not a suitable product for that person because of their advanced age."
She suggests avoiding shady pitches by asking friends and family for a referral to a reputable insurance agent.
Once you have a life insurance policy in force, it's recommended that you review your policy and beneficiaries every 12 to 18 months to ensure they're up to date. As Feldman points out, if you've gone through a divorce or gotten married and forget to update your beneficiaries, that can lead to problems when you die. " It's really important to make sure that those things are done properly," he stresses. Knowing you have the right life insurance policy and the right beneficiaries offers peace of mind that your loved ones will be taken care of should you pass away.
Additional Resources:
ACLI's Life Insurance Buying Tips
LIFE's Guide to Life Insurance
Standard & Poor's Insurance Ratings
United Policyholders' How to Do a 'Needs Analysis' Before you Buy Life Insurance
This post originally appeared on U.S. News & World Report.
Now see 7 simple tips for people who want to buy their first home >
A Bad Day For America In Iran, Syria And Afghanistan
AP
Tuesday Feb. 21 was a bad day for the U.S. in Iran, Syria, and Afghanistan.
In Afghanistan, protests against Americans who incinerated Korans at a military prison became so violent that Afghan police fired on the crowds killing three people. The anger is widespread, and more than 30 people have been wounded in protests throughout the country.
Afghans are forming outside compounds filled with police, contractors, and coalition forces chanting " death to America." This will do nothing but hurt American forces still fighting there, and make continued operations there through 2014 more difficult.
In Syria, where President Bashar al-Assad enjoys the support of both Iran and Russia, conditions are growing too dire for the U.S. to ignore.
The city of Homs, with the largest governing body in Syria and the largest number of anti-Assad protesters, is getting repeatedly shelled by government forces and Tuesday the attacks killed two Western journalists.
American reporter Marie Colvin and French photographer Remi Ochlik were killed along with 40 others when a shell struck the media center in Baba Amr where they were staying.
The White House has finally admitted the situation may demand military intervention. Obama spokesman Jay Carney told reporters that while the U.S. is reluctant to further the militarization of Syria, it would not " rule out additional measures."
When pressed Carney said " if we can't get Assad to yield to the pressure that we are all bringing to bear, we may have to consider additional measures."
Though he refused to elaborate, arming the rebels with weapons has recently been discussed and will likely be brought up Friday, when Secretary of State Clinton meets with representatives from 70 other countries in Tunisia.
This first " Friends of Syria" meeting will lay out an international response to the nearly year-long uprising. Russia will not attend the conference.
Finally, Iran has directly refused to allow IAEA nuclear inspectors into its suspected military test site at Parchin.
Tehran not only refused to allow inspectors access, it refused to a plan for resolving questions about its nuclear intentions, and declined interviews with its top scientists and military officials.
President Obama has stressed that inspections and sanctions would be used against Iran as long as possible, while insisting the U.S. would decisively prevent Iran from developing a nuclear weapon. Speculation about possible military action against Tehran is growing.
One of the more interesting reports comes from Joshua Kucera at EurasiaNet. Kucera talked to a Russian Foreign Ministry official who told him the Kremlin believes the U.S. may use its air base at Manas to launch an Iranian attack.
Located within Kyrgyzstan, officials there, and in Russia, are concerned about a retaliatory strike by Iran if the U.S. does attack from there. But with U.S. bases in Turkey, and Afghanistan, and the 5th Fleet parked in Bahrain, the Pentagon has plenty of options if it decides to move against Iran.
10 Things You Need To Know This Morning
Good morning. Here's what you need to know.
- Asian markets were up in overnight trading with the Nikkei rising 0.96 percent. Europe is sharply lower on eurozone PMI data and skepticism over the Greek deal, and U.S. futures are moderately lower.
- Eurozone composite PMI which measures manufacturing and services fell to 49.7 in February, from 50.4 the previous month. German PMI declined to 50.1 in February, down from 51 the previous month. French manufacturing PMI rose to 50.2 this month, from 48.5 in January. Now here are the 29 most bizarre economic indicators in the world >
- Chinese PMI came in at 49.7 in February according to a preliminary reading from HSBC Holdings Plc, compared with 48.8 the previous month. This however signaled a fourth straight month of contraction in manufacturing.
- Fitch cut Greece's long-term ratings to C from CCC. The ratings agency said Greece is highly likely to default in the near-term. This comes after talks that default risk is not off the table, despite Athens securing its second bailout yesterday. UBS Answers: Who are the fittest countries in Europe >
- Wells Fargo is buying BNP Paribas' North American energy lending unit. This includes $9.5 billion of loans from BNP, though only $3.9 billion of loans are drawn. Meanwhile, Citigroup is facing a multibillion dollar writedown on its investment in the Morgan Stanley Smith Barney brokerage, the WSJ reported.
- In earnings news, Toll Brothers reported Q1 net loss of $0.02 per share, on revenue of $322 million, missing expectations. Chesapeake Energy reported Q4 earnings of $0.63 per share, on revenue of $2.73 billion. HP is expected to report earnings of $0.87 per share today.
- President Obama will ask Congress to cut the corporate tax rate to 28 percent, down from 35 percent. Manufacturers would be given preference and would have a maximum effective rate of 25 percent.
- Existing home sales for January will be released at 10 AM ET. Consensus is for a rise in existing home sales to a 4.690 million unit rate. Follow the release at Money Game >
- Euro area industrial orders jumped 1.9 percent month-over-month in December beating expectations. This comes after a 1.1 percent decline the previous month. Orders of intermediate goods climbed 1.5 percent, while capital goods orders rose 4.2 percent.
- France's harmonized index of consumer prices or HICP, rose 2.6 percent from a year ago, staying near a three-year high in January. CPI however decreased 0.4 percent month-over-month. Morgan Stanley: This is what the euro economy will do in 2012 and 2013 >
- BONUS - Drew Barrymore was spotted carrying a sonogram fueling speculation that she might be pregnant.
Precious metals advanced sharply yesterday as investors tend to hold more metals against the high level of uncertainty, where investors were still weighing the Greek second bailout package and the private sector involvement in the deal along with the unclear European Central Bank role in fighting back the debt crisis.
However today the metals are trading within narrow levels since the opening in Asia, where we can see gold is fluctuating heavily within a narrow range as bulls and bears forces are almost equal, as some tend to take profit on the metal after the huge gains recorded yesterday, while others are still demanding the metal to protect their wealth against any surprises in the market.
Spot gold shed so far 0.04% or $0.70 per ounce after the opening of $1759.13 per ounce to currently trade around $1758.43 per ounce. The metal set so far the highest at $1760.35 and the lowest at $1754.30 per ounce.
Metals in general are biased to the downside today however, platinum was able to record gains, where the industrial-linked metal was affected sharply by the upbeat manufacturing performance in China, where according to the HSBC flash manufacturing PMI for February, the Chinese sector remained contracted in the month, yet it improve to 49.7 from 48.8, adding positivity to the market that China is recovering from the debt crisis in Europe which triggered the global slowdown.
Eyes will also be concentrated today on the manufacturing and services sectors in the euro-area region in general and in Germany specifically, with expectations the euro area region manufacturing and services sectors could have improved further in February, while the German sectors are also projected better this month.
Other fundamentals to watch today are the Bank of England Minutes and housing data from the world's largest economy, tracking how the Monetary Policy Committee voted on the interest rates and the asset purchases program, and then tracking the housing sector performance in January.
Among other precious metals, silver shed so far 0.07% or $0.02 per ounce to currently trade around $34.29 an ounce, compared with the opening level of $34.31 per ounce. The metal reached so far a high of $34.38 and a low of $34.15 per ounce.
Platinum however advanced 1.17% or $19.75 per ounce, trading now around $1706.50 per ounce, approaching gold which has been more expensive than Platinum late in 2011 after the escalating debt crisis and the global slowdown led investors to hold more of the shiny metal as a safe haven. The metal recorded so far the highest at $1709.75 and the lowest at $1686.00 per ounce, after the opening of $1686.25.
Palladium also gained today, adding $4.00 per ounce or 0.56% to $714.00 an ounce after the opening of $710.00 per ounce. The metal also has an industrial value and was supported by the manufacturing data released by China. The metal set a high of $716.88 and a low of $708.00 per ounce.
Silver
The upside move stopped in areas around the resistance of the sideway range, where this resistance is at 34.40-65. Momentum indicators are within overbought areas, which could force the metal to reverse slightly to the downside, correcting the bullish wave seen before. But, consolidation above 34.65 negates any expectations for a downside correction.
The trading range for today is among the key support at 32.80 and key resistance now at 35.70.
The short-term trend is to the downside with steady weekly closing below 38.00 targeting 20.05.
Support: 34.00, 33.75, 33.40, 33.20, 33.00
Resistance: 34.40, 34.65, 35.10, 35.70, 36.20
Recommendation Based on the charts and explanations above, our opinion is selling silver around 34.25, and take profit in stages at (33.75, 33.40 and 32.80) and stop loss with 4-hour closing above 34.65 might be appropriate
Gold
According to the bullish harmonic structure, we find the metal is still stable below the top of (C) point at 1763.00, while according to harmonic rules consolidation above this level is necessary to confirm the continuity of the upside move. But, in case the level of 1763.00 was able to force gold to reverse to the downside again and provide 4-hour closing below 1735.00, the downside movement is expected to return, while consolidation above 1763.00 could trigger a strong rebound targeting 1794.00 and maybe 1828.00.
The trading range for today is among the key support at 1705.00 and key resistance now at 1772.00.
The short-term trend is to the upside with steady weekly closing above 1475.00 targeting 1945.00.
Support: 1750.00, 1742.00, 1735.00, 1724.00, 1718.00
Resistance: 1763.00, 1768.00, 1772.00, 1780.00, 1794.00
Recommendation Based on the charts and explanations above, our opinion is selling gold around 1755.00, targeting 1742.00 and 1735.00 and stop loss with 4-hour closing above 1763.00. In case the metal reached our stop loss point, our opinion is buying gold around 1763.00, and take profit in stages at 1772.00, 1794.00 and 1828.00 and stop loss with 4-hour closing below 1735.00 might be appropriate.
Price is gradually approaching the harmonic target 127.2% for CD leg of the butterfly bullish harmonic pattern shown on image. Momentum indicators are providing extreme overbought signals, however any trading above 105.25 for today could maintain the bullish bias. Taking into consideration that we should monitor price action around the aforementioned 127.2% level, as it could be a critical intraday and short term juncture.
The trading range for the day is expected among the support at 103.35 and the resistance at 108.85.
The short-term trend is to the downside with steady weekly closing below 105.00, targeting 65.00
Support: 106.00, 105.25, 104.75, 104.40, 103.90
Resistance: 106.60, 107.10, 107.60, 108.85, 109.40
Recommendation Based on the charts and explanations above our opinion is buying crude around 106.00 and take profit at 107.60. stop loss with 4-hour closing below 105.25 might be appropriate
Ecpulse
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Crude oil rising more and more amid fears over oil supplies
Crude oil rose to significant highs amid concerns on global oil supplies where it reached to the highest for more than 7 consecutive months, as the IEA announced that talks with Iran on its nuclear program have reached a failure, which increased the possibilities of a military intervention.
Crude oil opened today’s session at $105.93 reaching so far a high of $106.38 and a low of $105.70 where it is currently trading positively around $106.25
The International Atomic Energy Agency (IAEA) said that it failed in talks with Iran over its nuclear weapon, as the country refused entering the team of inspectors into its nuclear base during two days of talks that ended yesterday.
Talks between the agency and Iran were aimed to ease rising tensions between the country and the west and avoid a possible military intervention, as Israel and the U.S. said that all options are available ensuring no nuclear weapon in the nation, where Iran will not remain silent where it will make a military reaction indeed.
These factors have pushed crude oil strongly upside countering all negative factors that would affect crude negatively and push it to the downside, as the commodity has benefitted from giving Greece the second bailout, but it didn’t pay attention to fears that spread in markets over the ability of Greece to meet the budget deficit’s target that required by troika, as the economy is struggling badly amid these tough austerity measures.
On the other hand, we look on the world’s second biggest economy and oil consumer China, released the preliminary HSBC PMI manufacturing index which advanced to 49.7, compared with January's final reading of 48.8, which indicated that the country’s manufacturing side is getting better and may improve more in the coming period, especially that the Chinese central bank cut reserve requirements from February 24 to support economic growth more.
In general, by collecting all these factors we can see a bullish bias for the commodity and as we said several times before, the effect from Iranian oil supplies may be doubled if a military intervention happens between the west and Iran.
Iran defiant as U.N. nuclear talks fail
Nackaerts of the IAEA speaks to media at the airport in Vienna after arrival from Iran
VIENNA/TEHRAN (Reuters) - The U.N. nuclear watchdog ended its latest mission to Iran after talks on Tehran's suspected secret atomic weapons research failed, a setback likely to increase the risk of confrontation with the West.
In a defiant response, Supreme Leader Ayatollah Ali Khamenei said Iran's nuclear policies would not change despite mounting international pressure against what the West says are Iran's plans to obtain nuclear bombs.
" With God's help, and without paying attention to propaganda, Iran's nuclear course should continue firmly and seriously," he said on state television. " Pressures, sanctions and assassinations will bear no fruit. No obstacles can stop Iran's nuclear work."
As sanctions mount, ordinary Iranians are suffering from the effects of soaring prices and a collapsing currency. Several Iranian nuclear scientists have been killed over the past two years in bomb attacks that Tehran has blamed on its arch-adversary Israel.
In response, Iran has issued a series of statements asserting its right to self-defence and threatening to block the Strait of Hormuz, a vital oil tanker route.
The collapse of the nuclear talks came as Iran seems increasingly isolated, with some experts seeing the Islamic republic's mounting defiance in response to sanctions against its oil industry and financial institutions as evidence that it is in no mood to compromise with the West.
Elections on March 2 are expected to be won by supporters of Khamenei, an implacable enemy of the West.
The failure of the two-day visit by the International Atomic Energy Agency could now hamper any resumption of wider nuclear negotiations between Iran and six world powers as the sense grows that Tehran feels it is being backed into a corner.
In the view of some analysts, the Iranians may be trying to keep their opponents guessing as to their capabilities, a diplomatic strategy that has served them well in the past.
" But they may be overdoing the smoke and mirrors and as a result leaving themselves more vulnerable," said professor Rosemary Hollis of London's City University.
A team from the IAEA had hoped to inspect a site at Parchin, southeast of Tehran, where the agency believes there is a facility to test explosives.
" During both the first and second round of discussions, the agency team requested access to the military site at Parchin. Iran did not grant permission for this visit to take place," the Vienna-based IAEA said in a statement.
" It is disappointing that Iran did not accept our request to visit Parchin. We engaged in a constructive spirit, but no agreement was reached," said IAEA Director General Yukiya Amano.
A Western official added: " We think that if Iran has nothing to hide why do they behave in that way?"
" It is another missed opportunity," French Deputy Foreign Ministry spokesman Romain Nadal said. " This refusal to cooperate adds to the recent statements made by Iranian officials welcoming the progress of their nuclear activities."
Iranian analyst Mohammad Marandi said providing the West with any more access than necessary to nuclear sites would be a sign of weakness.
" Under the current conditions it is not in Iran's interest to cooperate more than is necessary because the West is waging a war against the Iranian nation," he told Reuters.
Earlier, Iran's envoy to the IAEA, Ali Asghar Soltanieh, said Tehran expected to hold more talks with the U.N. agency, but Amano's spokeswoman said no further meetings were planned.
Iran rejects accusations that its nuclear program is a covert bid to develop a nuclear weapons capability, saying it is seeking to produce only electricity.
But its refusal to curb sensitive atomic activities which can have both civilian and military purposes, and its record of years of nuclear secrecy has drawn increasingly tough U.N. and separate U.S. and European measures.
The United States and Israel have not ruled out using force against Iran if they conclude that diplomacy and sanctions will not stop it from developing a nuclear bomb.
" This was only to be expected, given Iran's evasions," a senior Israeli official said.
The failure of the IAEA's mission may increase the chances of a strike by Israel on Iran, some analysts believe.
But this would be " catastrophic for the region and for the whole system of international relations," Russian Deputy Foreign Minister Gennady Gatilov said.
STILL TIME FOR DIPLOMACY?
An IAEA report in November suggested Iran had pursued military nuclear technology and helped precipitate the latest sanctions by the European Union and United States.
One key finding was information that Iran had built a large containment chamber at Parchin to conduct high-explosives tests. The U.N. agency said there were " strong indicators of possible weapon development."
The IAEA said intensive efforts had been made to reach agreement on a document " facilitating the clarification of unresolved issues" in connection with Iran's nuclear program.
" Unfortunately, agreement was not reached on this document," it said in an unusually blunt statement Wednesday.
The IAEA mission's failure may reduce the chance of any resumption of wider nuclear negotiations between Iran and the six world powers - the United States, China, Russia, Britain, France and Germany.
The West last week expressed some optimism at the prospect of new talks, particularly after Iran sent a letter to EU foreign policy chief Catherine Ashton promising to bring " new initiatives," without stating preconditions.
But the United States and its allies may be reluctant if they feel that the Islamic state is unlikely to engage in substantive discussions about its nuclear activities.
(Additional reporting by Dan Williams, John Irish and William Maclean writing by Giles Elgood editing by Janet McBride)
HK shares close up 0.3 pct, China developers strong
view of Hong Kong CBD from the sea with One International Finance Centre clearly visible
The Hang Seng Index closed up 0.33 percent at 21,549.28. The China Enterprises Index of top mainland listings in Hong Kong finished up 1.15 percent at 11,823.6.
The Shanghai Composite Index ended up 0.93 percent at 2,403.59, the highest close since Nov. 29 and above its 125-day moving average for the first time since last May. A-share turnover surged to the highest since Nov. 3.
HIGHLIGHTS:
* Chinese property developers were strong after the official Shanghai Securities News, citing Shanghai's housing regulator, reported on Wednesday that non-local residents of Shanghai would qualify to buy second homes once they had been resident in the city for three years, sparking talk of easing in the embattled sector.. Agile Property Holdings Ltd jumped 7.2 percent in more than twice its 30-day average volume as investors covered short positions. Short-selling averaged about 23 percent of Agile's total turnover in the first two days of the week.
* Li & Fung Ltd was among leading losers in Hong Kong, down 3.2 percent after Wal-Mart, for which it manages supply chains, reported weaker-than-expected earnings and forecasts that suggest results in this quarter and fiscal year may again disappoint.. Before Wednesday, Li & Fung was up more than 25 percent this year, largely on improving U.S. data, after slumping more than 36 percent in 2011 and underperforming the 20 percent loss on the Hang Seng Index.
* Alibaba.com Ltd rose more than 42.7 percent in more than 32 times its 30-day average volume to a seven-month high after resuming trading after a more than a week. It followed an announcement that parent Alibaba Group would take it private for about $2.5 billion at its IPO price. (Reporting by Clement Tan Editing by Chris Lewis)
China PMI lifts Nikkei to highest level in six months
Tokyo Stock Exchange building
* Automakers extend gains, Komatsu reverses early losses
* Mazda to raise $2 bln via share issue
By Dominic Lau and Mari Saito
TOKYO, Feb 22 (Reuters) - Japan's Nikkei share average rose 1 percent on Wednesday to its highest in six months, boosted by news that China's manufacturing sector rose to a four-month high in February although it remained in contraction territory.
The HSBC flash purchasing managers index, the earliest indicator of China's industrial activity, rose to 49.7 in February from 48.8 in January. The PMI has been below 50, which demarcates expansion from contraction, for most of the last eight months.
The Nikkei closed at 9,554.00. The benchmark has faced stiff resistance at the 9,500 level for the past two sessions.
Shoji Hirakawa, chief strategist at UBS, said expectations of monetary easing by major central banks would boost equities and Japanese stocks, which have a low book value, tend to outperform in such situations.
" The index is trying to break the 10,000 mark as early as March," he said, adding that if not, it would reach close to that level.
The Nikkei China 50 index, comprising 50 Japanese stocks with significant exposure to China, climbed 0.8 percent after ending the morning session 0.3 percent lower.
Komatsu Ltd, which sells more than 20 percent of its construction machinery in China, pared losses, up 0.6 percent to 2,425 yen. It ended morning trade lower at 2,371 yen.
Automakers extended gains after the PMI data, with Nissan Motor Co up 2.3 percent, Toyota Motor Corp adding 1.8 percent and Honda Motor Co gaining 2.1 percent.
After the bell, Mazda Motor Corp said in a regulatory filing that it would raise up to 162.8 billion yen ($2 billion) in a public share offering. The offering would cause a 68.5 percent dilution of its existing shares, according to a Reuters calculation.
Mazda shares closed up 1.4 percent after shedding 10 percent on Tuesday on reports of the fundraising. Sources told Reuters it planned to raise up to 100 billion yen through the offering.
WEAK YEN HELPS
A weaker yen also raised the appeal of exporter shares, as the dollar traded above 80 yen for the first time since August .
" The 80-yen level is extremely important for sentiment and now that it's managed to exceed that level, we'll see steady gains for equities," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities.
" There is also the launch of several toshin funds (investment trust funds) later this month, which will spur buying so we could see the Nikkei reaching 9,700 by the end of the month," he said, adding that investors were buying Nikkei March call options at 10,000.
The broader Topix advanced 1.1 percent to 825.40, with nearly 2.44 billion shares changing hands, up from 2.38 billion the previous session.
According to Thomson Reuters Datastream, the Topix carries a 12-month forward price-to-book ratio of 0.91, much cheaper than S& P 500's 1.94 times and STOXX Europe 600's 1.35.
Deutsche Bank on Tuesday raised its 12-month Topix target by 4.5 percent to 930 from 890, representing an upside of 12.7 percent from Wednesday's close.
Wednesday's afternoon rally also lifted Sony Corp , Panasonic Corp and TDK Corp. They climbed between 0.6 and 2.3 percent.
The Nikkei is up 8.5 percent this yearn on the back of strong economic data out of the United States, the European Central Bank's liquidity injection of nearly half a trillion euros and further easing steps by the Bank of Japan.
If the index were to end the month with the current gains, it would be the best February performance since 1991. ($1 = 79.7500 Japanese yen) (Editing by Nick Macfie)
