Markets fragile as investors await Cyprus vote

Associated Press
Protesters shout slogans during a protest outside of the parliament in Nicosia, Cyprus, Monday, March 18, 2013. A vote on a bailout package for Cyprus that includes an immediate tax on all savings accounts has been postponed until Tuesday evening. Yiannakis Omirou, the speaker of Parliament, said the delay was needed to give the government time to amend the deal reached over the weekend that prompted an outcry from those who thought their money was safe. In order to get euro 10 billion ($13 billion) in bailout loans from international creditors, Cyprus agreed to take a percentage of all deposits — including ordinary citizens' savings — an unprecedented step in Europe's 3 ½-year debt crisis. (AP Photo/Petros Karadjias)
.

View photo

Protesters shout slogans during a protest outside of the parliament in Nicosia, Cyprus, Monday, March 18, 2013. A vote on a bailout package for Cyprus that includes an immediate tax on all savings accounts has been postponed until Tuesday evening. Yiannakis Omirou, the speaker of Parliament, said the delay was needed to give the government time to amend the deal reached over the weekend that prompted an outcry from those who thought their money was safe. In order to get euro 10 billion ($13 billion) in bailout loans from international creditors, Cyprus agreed to take a percentage of all deposits — including ordinary citizens' savings — an unprecedented step in Europe's 3 ½-year debt crisis. (AP Photo/Petros Karadjias)

LONDON (AP) — Financial markets were tense Tuesday as investors awaited a vote in Cyprus on a contentious plan to raid bank deposits to help fund the country's bailout.

On Monday, trading was extremely choppy, particularly in Europe, as investors fretted over an agreement between cash-strapped Cyprus and international lenders to seize a percentage of deposits in the country's banks.

A vote on the seizures has been scheduled for later Tuesday, although it could be delayed again if the government does not secure the necessary support.

If the bill isn't passed, Cyprus faces bankruptcy and a potential exit from the euro. That's a concern for markets — as is the expected turmoil the country will face when banks reopen Thursday. Depositors around Europe are watching developments closely now that the taboo of raiding deposits has been violated.

"The underlying tone of the market is set to stay jittery with investors unnerved about the potential loss of trust between banks and small depositors," said Jane Foley, an analyst at Rabobank International.

In Europe, the FTSE 100 index of leading British shares was flat at 6,461 while Germany's DAX fell 0.4 percent to 7,976. The CAC-40 in France was 0.9 percent lower at 3,793.

The euro steadied after falling Monday to its lowest level against the dollar in 2013. It was trading flat at $1.2938. Oil prices were little changed too, with the benchmark New York rate down 26 cents at $93.85 a barrel.

In the U.S., the Dow Jones industrial average was up 0.3 percent at 14,487 while the broader S&P 500 index was flat at 1,553.

The focus the rest of the day will likely center on developments in Nicosia, the Cypriot capital.

"If this goes as scheduled, it will be well into the U.S. trading day before we get a result, plus the rather critical direction this will bring for stocks," said Fawad Razaqzada, market strategist at GFT Markets.

Cypriot officials on Tuesday proposed tweaking the seizures plan to spare small account holders.

Under a new draft bill discussed in Parliament's finance committee, deposits below €20,000 ($25,900) would be exempt from any charge, unlike before. However, those between €20,000 and €100,000 would still have a 6.75 percent charge imposed, and those above €100,000 will be stripped of 9.9 percent.

However, in a sign that discussions are ongoing, the country's central bank governor recommended that no levy be imposed on accounts below €100,000 — the amount that is insured by the government.

Earlier, benchmarks in Asia were mostly higher. Japan's Nikkei 225 index jumped 2 percent to close at 12,468.23 as the yen dropped against the dollar.

Hong Kong's Hang Seng shed morning gains to fall 0.2 percent to 22,041.86. South Korea's Kospi rose 0.5 percent to 1,978.56. Benchmarks in Singapore, Taiwan and Indonesia were also higher, while Thailand and the Philippines dropped. After opening higher, Australia's S&P/ASX 200 reversed course and fell 0.5 percent to close at 4,992.20.

View Comments (284)