Global stocks slide on concern over Cyprus Bank levy
Global stocks tumbled the most in more than two weeks after the euro area forced Cyprus to adopt a levy on bank deposits, prompting concern that the single currency's debt crisis will reignite. U.S. index futures and Asian shares also sank.
Ericsson AB posted its largest decline in more than a week after agreeing to end its unprofitable chip venture with STMicroelectronics NV. Commerzbank AG lost 1.7 percent after Credit Suisse Group AG lowered its recommendation on Germany's second- largest bank. BHP Billiton Ltd. contributed the most to a slide by commodity producers as metal prices fell in London.
The Stoxx Europe 600 Index fell 0.9 percent to 294.82 at 8:47 a.m. in London, its biggest drop since March 1. Cypriot and Greek stock markets are closed for a holiday today. Futures on the Standard & Poor's 500 Index slid 1 percent, while the MSCI Asia Pacific Index retreated 1.9 percent.
"This creates a precedent and is a bit scary today," said Matthieu Giuliani, who helps oversee $5.3 billion as a fund manager at Banque Palatine SA in Paris. "In the short term, it hurts the market. But this is a case specific to Cyprus. I don't see Germany or the EU imposing such a thing on Spain or Italy. It would create panic in the banking system."
The volume of shares changing hands in companies listed on the Stoxx 600 was more than double the average of the last 30 days, according to data.
While Cyprus accounts for less than half a percent of the 17-nation euro area's economy, the raid on bank accounts risks a resumption of the financial crisis that began in 2009 in Greece. Moody's Investors Service said that the move limits support for bank creditors across Europe and shows that policy makers will risk disrupting financial markets to avoid sovereign defaults.
Cyprus's President, Nicos Anastasiades, will try to persuade lawmakers to back the plan. The levy enabled the euro area to lower its bailout of the country to 10 billion euros ($13 billion) from an original figure of about 17 billion euros.
Anastasiades will defend his decision to accept the levy at a parliamentary session beginning at 4 p.m. in Nicosia. The vote comes a day later than originally planned as Anastasiades seeks to secure the majority he needs.
The Stoxx 600 has still risen 5.4 percent this year as data on U.S. payrolls and Chinese exports bolstered confidence in the global economic recovery and central banks around the world continued their stimulus measures.
Ericsson lost 1.8 percent to 83.85 kronor after agreeing to wind down the ST-Ericsson joint venture and divide the assets. The Swedish and Italian companies failed to find a buyer for the business. STMicroelectronics will incur cash costs of $350 million to $450 million. The Italian company said the charges were lower than it had estimated in January. STMicroelectronics climbed 1.8 percent to 5.96 euros.