Asian markets bounce back on Cyprus rethink hopes
Asian markets mostly rebounded on Tuesday while the yen fell against the dollar and euro as concerns over the euro zone abated on news Cyprus was reworking a controversial savings levy.
Nicosia and its international creditors have gone back to the drawing board following a global outcry and sell-off on stock markets on Monday in reaction to the tax proposal that is aimed at qualifying Cyprus for a much-needed bailout.
Tokyo jumped 2.03 per cent, or 247.60 points, to end at 12,468.23, Seoul gained 0.53 per cent, or 10.38 points, to 1,978.56 and Shanghai climbed 0.78 per cent, or 17.41 points, to 2,257.43.
However, Hong Kong suffered a late sell-off to end 0.19 per cent lower, shedding 41.50 points to 22,041.86, while Sydney dropped 0.56 per cent, or 28.0 points, to 4,987.4.
Under the proposal set out on Saturday, Cyprus agreed that deposits of more than 100,000 euros (US$129,000) would be hit with a 9.9 per cent charge and a 6.75 per cent levy would be imposed for anything below that threshold.
The news sparked fears it could reignite the euro zone debt crisis – possibly leading to similar measures elsewhere – and hit confidence in other troubled countries such as Spain and Italy.
In a late development after most regional markets closed on Tuesday, a revised bailout plan suggested that bank savings below 20,000 euros would be exempt from a levy.
On Wall Street the Dow, which last week hit a record high, finished down 0.43 per cent, while the S&P 500 dropped 0.55 per cent and the Nasdaq lost 0.35 per cent.
“Monday’s reaction to the Cyprus situation was not unexpected given stocks’ stellar performance over the past several weeks,” said Nicholas Smith, Japan equity strategist at CLSA in Tokyo.
Cyprus baulked at putting the bailout to a vote in parliament as the crippling terms sparked a public outcry, while banks have been closed to stop depositors removing all their cash.
The euro zone told Cyprus on Monday to take another look at the proposal, with Eurogroup President Jeroen Dijsselbloem of the Netherlands saying ministers “continue to be of the view that small depositors should be treated differently from large depositors”.
Currency dealers welcomed the development. The European single currency fetched 123.81 yen in Tokyo from 123.41 yen in New York late Monday, while the dollar bought 95.33 yen Tuesday, up from 95.23 yen. But the euro dipped to US$1.2934 from US$1.2957.
On Monday in Asia the European unit was as low as 121.76 yen and US$1.2903, while the dollar sat at 94.36 yen.
An equity trading director at a foreign brokerage told Dow Jones Newswires: “Despite the recent volatility, stocks retain their vitality, and yesterday’s sell-off should provide a bargain-hunting opportunity.”
Oil prices were mixed, with New York’s main contract, light sweet crude for delivery in April, falling 11 cents to US$93.63 a barrel in the afternoon while Brent North Sea crude for May delivery dropped 45 cents to US$109.38.