(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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