Monday, March 18, 2013

Economic Journal - Monday, 3/18/2013

(As of 7:20 am PST)
 
A small nation is packing a big punch to the markets this morning.  Cyprus, the tiny island nation in the Mediterranean is the culprit of a global sell off in stocks this morning as investors are eyeing the country’s controversial bailout agreement.  Over the weekend, Cyprus announced it would receive over 10 billion euros in a bailout from the Euro-zone and International Monetary Fund to resolve its debt crisis.  The bailout agreement included however, a controversial tax levy on bank deposits for depositors’ money at the banks.  Depositors with more than 100,000 euros will see a tax of 9.9%, while those with less deposits will receive a 6.75% tax.  The levy is unprecedented causing concern over a run on the banks particularly if this sort of program takes effect in larger struggling economies like Spain and Italy.  A parliamentary vote for the proposed levy is set for Tuesday.  Many analysts think the likelihood of a bank run in peripheral countries is unlikely, however in the short term the risk is worth noting.  The only US report of note today showed that US homebuilder confidence declined in March.   Gold is rallying, up 1% as investors moved money out of risky assets and into the safe haven.  Asian markets finished in the red, and the same story is shaping up in Europe and the US.  The risk trade appears off, while investors appear to be using Cyprus to consolidate gains.

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