Markets shrug off Cyprus rejection of bailout plan
3/19/2013 9:10:51 PM
(AP) Markets shrug off Cyprus rejection of bailout plan
By PAN PYLAS
AP Business Writer
Financial markets on Tuesday shrugged off the Cypriot parliament's rejection of a plan to confiscate part of people's bank deposits in order to qualify for an international bailout loan.
The plan was required for Cyprus to get its rescue loans from euro partners and the International Monetary Fund, so its rejection casts doubt about its financial future.
But markets proved resilient to the news on expectations that the Cypriot politicians would try to find a new deal that would satisfy the bailout requirements. Political leaders will meet again on Wednesday.
Europe's markets had closed lower before the vote came in, with Britain's FTSE 100 falling 0.3 percent to 6,441.32 and Germany's DAX dropping 0.8 percent to 7,947.79. The CAC-40 in France ended 1.3 percent lower at 3,775.75.
The euro remained steady after the vote, trading 0.4 percent lower on the day at $1.2880.
In the U.S., the Dow Jones industrial average was up almost 0.1 percent at 14,455 while the broader S&P 500 index was down 0.2 percent at 1,548.34.
One reason markets have remained firm in the face of the uncertainty over Cyprus' bailout is that the European Central Bank continues to provide a backstop to eurozone markets.
The ECB said after the vote that it would continue to provide emergency liquidity to the Cypriot banks, making sure they do not collapse, even though a bailout has yet to be completed.
The central bank also has a scheme in place to help lower eurozone countries' borrowing rates in bond markets, should they demand the aid. That has helped the bond markets in Italy and Spain remaine steady this week.
Cyprus' bailout drama may yet shake markets, particularly in Europe, in coming days if it appears that a new deal is difficult to get. Investors will be monitoring closely any new proposals by Cypriot politicians tomorrow.
Earlier, 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.