Asian markets mixed after Cyprus bailout vote
Asian markets were mixed on Wednesday after Cypriot lawmakers comprehensively rejected a plan to tax savings as part of a crucial bailout deal.
The euro rebounded from morning losses to climb against the yen and dollar as European leaders sought to sooth investor concerns, saying they were willing to work with Nicosia to help it avoid bankruptcy.
Sydney fell 0.40 per cent, or 20.1 points, to 4,967.3 while Seoul lost 0.97 per cent, or 19.15 points, to 1,959.41.
Bargain hunters moved in to send Hong Kong up 0.97 per cent, or 214.58 points, to 22,256.44, while Shanghai surged 2.66 per cent, or 59.94 points, to 2,317.37.
Tokyo was closed for a public holiday.
Cypriot MPs on Tuesday rejected a proposal to impose a levy on savings as part of a deal agreed with international creditors for a 10-billion-euro (US$13 billion) rescue.
The plan had been to charge 6.75 per cent for deposits of 20,000-100,000 euros and a 9.9 per cent tax on anything above that, with savings of up to 20,000 euros exempt.
The 5.8 billion euros the proposal would have raised was crucial to Nicosia getting the full rescue, and with that now in doubt Cyprus must find other ways to raise cash to repay its debts.
However while Tuesday’s events raised fears the country could exit the euro zone, analysts said they soothed fears such levies could be introduced in other troubled eurozone countries, which could have hammered confidence in the region.
Stephen Wood, chief market strategist at Russell Investments, told Dow Jones Newswires: “We’re watching very closely, but at present we don’t think Cyprus is a game-changer in Europe.
“We’re looking at financial-system indicators in Italy, Spain, Portugal, Greece and also bank data to see if there’s a run or even a jog on banks in those countries. We don’t see that just yet.”
The European Central Bank also said it would continue to provide financial support for troubled Cypriot banks, a key step to allow all sides a little more time to try to find a way out of the impasse.
But Stan Shamu, market strategist at IG Markets in Melbourne, offered a word of warning, saying: “The Cyprus issue is far from over.
“I don’t think it will be a situation where the ECB has stepped in and we don’t have to worry about it.”
On currency markets the euro climbed on hopes that the crisis can be overcome.
In afternoon trade the single currency bought US$1.2898, down from US$1.2881 in New York late Tuesday, while it sat at 122.93 yen from 122.59 yen.
The dollar fetched 95.29 yen from 95.23 yen.
On Wall Street markets were mixed, with the Dow nudging up 0.03 per cent, the S&P 500 falling 0.24 per cent and the Nasdaq off 0.26 per cent.
US traders took heart from expectations the Federal Reserve could on Wednesday deliver an improved view of the world’s biggest economy.
The Fed’s policy committee “may sound more upbeat this time around amid the more broad-based recovery”, said David Song of DailyFX in the United States.