Cyprus uncertainty keeps markets in check

Market Analyze CBS/iStockphoto

LONDON Sentiment in the world's markets remained fragile Wednesday as investors awaited the details of the capital controls Cyprus is expected to introduce when its banks reopen.

The country's banks, which have been closed for the best part of two weeks, are due to start doing business again on Thursday following an international bailout agreement that's caused jitters around the world -- but particularly in Europe -- over the safety of deposits. Under the terms of the bailout, Cyprus is closing its second-largest bank Laiki and raiding big deposits in it, as well as in Bank of Cyprus.

"Markets are eagerly waiting to read the Cypriot government's capital control measures," said Alastair McCaig, market analyst at IG. "As capital control measures are still in place for Icelandic depositors following their banking collapse five years ago, it does call into question the Cypriot government's insistence that these will only be 'temporary'."

In Europe, the FTSE 100 index of leading British shares was down 0.5 percent at 6,366 while Germany's DAX fell 0.8 percent. The CAC-40 in France was 1.4 percent lower at 3,698.

The euro also remained under pressure trading 0.5 percent lower at $1.2793. The currency has been on the slide since a top European official said the Cyprus bailout may be a model for the future. Though others have since sought to dismiss that idea, the thought has now been embedded into investors' minds.

"Despite the efforts of various eurozone politicians to reassure depositors that Cyprus's banking bail-in will not be used as a template, they will find it difficult to re-seal the can of worms," said Jane Foley, senior currency strategist at Rabobank International.

Wall Street was poised for a retreat at the open, with both Dow futures and the broader S&P 500 futures 0.4 percent lower.

Earlier, Asian stocks fared better as they rose in the slipstream of Tuesday's advance in U.S. stock markets, which saw the S&P 500 edge up towards an all-time high and the Dow rise to a new record.

"It would seem that at least on Wall Street the bears are still in hibernation mode," said Fawad Razaqzada, market strategist at GFT Markets.

Japan's Nikkei rose 0.2 percent to 12,493.79 while Hong Kong's benchmark Hang Seng index rose 0.6 percent to close at 22,464.82. In mainland China, the Shanghai Composite Index advanced 0.2 percent to 2,301.26 while the smaller Shenzhen Composite rose 0.3 percent to 955.24.

Oil prices tracked equities and were falling as European stocks dipped -- benchmark crude for May delivery fell 60 cents to $95.74 a barrel.

Comments

Market Data

Market News

Stock Watchlist