Global stocks slide on con­cern over Cyprus Bank levy

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

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.

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