Tags: Euro | US | Stock | Cyprus

Euro, US Stock Futures Slide on Cyprus Worries

Sunday, 17 Mar 2013 06:00 PM

The euro dropped to its lowest level this year and the yen strengthened against all major currencies in Asian trading Monday, as an unprecedented levy on bank deposits in Cyprus threatens to plunge Europe back into crisis. U.S. stock futures and Australian shares fell, while gold jumped.

The euro declined 1.2 percent to $1.2916 and the yen gained 0.4 percent to 94.91 per dollar. Standard & Poor’s 500 Index futures fell 1 percent, Australia’s S&P/ASX 200 Index lost 1.3 percent and New Zealand’s NZX Index slipped 0.9 percent. Gold advanced 0.7 percent and silver rose 0.6 percent.

Cypriot President Nicos Anastasiades bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.5 billion) by taking a piece of every bank account in Cyprus. Anastasiades delayed a vote on the measure in parliament until today, a day later than planned, as he seeks more time to convince lawmakers to back him.

“The concern is that this bailout plan was forced upon deposit-holders, taxing them, and therefore an involuntary support for the bail-out,” said Imre Speizer, a strategist at Westpac Banking Corp. in Auckland. “If this is a template for future bailouts, then that’s worrying for any of the larger countries if they have to go down this route. It isn’t affecting only the euro, it’s affecting risk appetite in general.”

Scenes of Cypriots lining up at cash machines raised the specter of capital flight elsewhere and threatened to disrupt a market calm that settled over the 17-member bloc since the European Central Bank’s pledge in September to backstop troubled nations’ debt. With no government in Italy, Spain in the throes of a political scandal and Greece struggling to meet the terms of its own bailout, more turmoil could hamper efforts to end the crisis.

Pimco's Gross Concerned

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, said on Twitter that the concern in Cyprus “moves risk-on trade to backseat.” He added: “Sell euro as well.”

“The plan is a haphazard way of funding a bailout, as the ’stability levy’ has the potential to start a bank run in Cyprus and bigger eurozone economies, where public finances are already fragile,” said Matthew Sherwood, head of investment markets research in Sydney at Perpetual Investments, which manages about $25 billion.

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The euro dropped to its lowest level this year and the yen strengthened against all major currencies in Asian trading Monday, as an unprecedented levy on bank deposits in Cyprus threatens to plunge Europe back into crisis. U.S. stock futures and Australian shares fell.
Euro,US,Stock,Cyprus
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2013-00-17
Sunday, 17 Mar 2013 06:00 PM
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