World stocks subdued as Cyprus vote looms

An employee of the Stock Exchange walks next to a display showing stock price movements in Athens, Tuesday, March 19, 2013. Banks stocks were sharply lower on the Athens Stock Exchange, as trading resumed for the first time in Greece since the details of a bailout in Cyprus and a shock levy on bank deposits were announced. Trading in the shares of Bank of Cyprus and Laiki was suspended for two days on the Athens Stock Exchange. (AP Photo/Thanassis Stavrakis) Thanassis Stavrakis

BANGKOK World stock markets were mostly subdued Tuesday ahead of a vote in Cyprus on a contentious measure to help fund the European country's bailout by taxing bank deposits.

Stock markets dropped around the world Monday as jitters intensified over an agreement between cash-strapped Cyprus and its lenders to fund a 15.8 billion euros ($20.4 billion) rescue plan by taxing deposits in the country's banks. The country's parliament holds a vote on the plan Tuesday.

Some lawmakers favor lowering the tax rate on deposits under 100,000 euros. To do that, however, they have to raise the rate for the larger depositors, since the overall scheme has to raise a total of 5.8 billion euros.

European shares fell in early trading. Britain's FTSE 100 dropped 0.2 percent to 6,443.33. Germany's DAX lost 0.4 percent to 7,979.54. France's CAC-40 shed 0.4 percent to 3,811.57. Futures augured slight gains for Wall Street. Dow futures were up 0.1 percent at 14,401 and S&P futures add 0.1 percent to 1,547.80.

Benchmarks in Asia were mostly higher. Japan's Nikkei 225 index jumped 2 percent to close at 12,468.23 as the yen dropped against the dollar.

Hong Kong's Hang Seng shed morning gains to fall 0.2 percent to 22,041.86. South Korea's Kospi rose 0.5 percent to 1,978.56. Benchmarks in Singapore, Taiwan and Indonesia were also higher, while Thailand and the Philippines dropped. After opening higher, Australia's S&P/ASX 200 reversed course and fell 0.5 percent to close at 4,992.20.

Analysts said Monday's sell off might have been an overly strong reaction to problems in Cyprus.

"For yesterday, the whole Asian market had a big drop, but maybe dropped too much," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. "Maybe there is overreaction in Hong Kong yesterday so today we have a rebound."

But some analysts said the crisis over Cyprus calls into question the viability of the euro common currency and could undermine those who favor regional unity. If implemented, the plan would represent the first time in the European debt crisis that bank deposits have been seized and has stoked fears of bank runs among the 16 other countries that use the euro.

"The crisis creates further risks to the fragile pro-EU, pro-euro political consensus," said Tina Fordham, political analyst at Citigroup Global Markets. "We believe a proportion of the Europe-wide electorate will be disconcerted over the long-term by the implied threat to the deposit guarantee, and this sentiment will be promoted by anti-Europe politicians."

Among individual stocks, Japan's Sony Corp. surged 6.8 percent. Mazda Motor Corp. advanced 5.6 percent.

On Wall Street, the Dow dropped 0.4 percent to 14,452.06. The Standard & Poor's 500 index fell 0.6 percent to 1,552.10. The Nasdaq composite index dropped 0.4 percent to 3,237.59.

Benchmark oil for April delivery was down 9 cents to $93.65 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 29 cents to close at $93.74 per barrel on the Nymex on Monday.

In currencies, the euro fell to $1.2940 from $1.2948 late Monday in New York. The dollar rose to 95.46 yen from 95.42 yen.

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