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London Market Wrap

Posted by Joseph Trevisani on Mar 18, 2013 8:32:00 AM

EURO

The euro recovered from the 1.2884 low in Europe and rose by 91 points to 1.2975 on a shortcovering rebound after the large 164 pip opening price gap from Friday’s New York close. The euro ended last week at 1.3074 and reopened in Asia at 1.2910 following the weekend news of Cyprus’ plan to impose an unprecedented levy on bank deposits that has threatened to throw Europe back into a financial crisis.

Cypriot President Nicos Anastasiades agreed to the demand of the eurozone’s financial ministers that the government raise 5.8 billion euros for a plan to support banks damaged by ownership of Greek sovereign debt, by taking a piece of every bank account in Cyprus.

On Sunday, a government source close to the consultations told Reuters that authorities were hoping to cut the proposed tax to 3.0 percent from 6.7 percent for deposits under 100,000 euros. The rate for deposits above that would then be jincreased to 12.5 percent from 9.9 percent.

Cypriot President Nicos Anastasiades, a conservative elected just three weeks ago, said in a TV address that the tax was an alternative to a disorderly bankruptcy. It was painful, but "will eventually stabilize the economy and lead it to recovery".

Russian President Valdimir Putin criticized the bank levy as unfair and setting a dangerous precedent. Up to a third of the total deposits in Cypriot banks may be from Russia.

Chris Advincula

Market Strategist

WorldWideMarkets

 

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