Cypriot Shock Heard Round the World

March 18, 2013

Global financial markets were shocked over the weekend by a deal between EU finance ministers and the government of Cyprus, pending ratification by Cypriot legislators,that subjects all bank deposits in that country to a levy of 7.5% for accounts under 100,000 euros and 9.9% for amounts over that threshold.  In return for this unprecedented penalty on all depositors, Cyprus would receive EUR 10 billion in bailout money.  In response to this news on an otherwise light news and data day,

  • There’s been a run on ATMs in Cyprus.
  • Fear is spreading that this move will set a precedent in other troubled euro area economies.
  • Equities and bond yields fell in Asia and Europe.
  • The euro sank as low as $1.2882, and the dollar and yen have been well-bid in a new wave of risk aversion.
  • Oil prices are down, but precious metals have been more strongly bid, with gold moving over $1600/ounce.

Japan’s Nikkei slumped 2.7%.  Equities also fell by 2.1% in Australia, 2.0% in Hong Kong 1.8% in the Philippines, 1.5% in China and Taiwan, 0.9% in South Korea and Singapore, and 0.7% in  India.  In Europe, both Spain’s IBEX and Italy’s MIB have dropped by 2.1% so far.  The Paris Cac and German Dax are off 1.2% and 1.0%.  Britain’s Ftse has declined 0.7%.

The 10-year British gilt and German bund yields are off five basis points apiece.  The 10-year Japanese JGB slipped three bps to 0.60%.

The dollar is 0.4% weaker against the yen and has dipped 0.1% versus sterling, which is shows some rare resilience because Britain long ago opted out of Ezone membership.  The U.S. currency has strengthened 1.0% on net against the euro, 0.6% versus the loonie, 0.4% relative to the Swiss franc and kiwi, and 0.3% against the kiwi.  The yuan is unchanged.

The price of West Texas Intermediate oil dropped 1.1% to $92.45 per barrel.  Gold is 0.6% stronger at $1602.30 per ounce.

Euroland posted a smaller EUR 3.5 billion seasonally adjusted trade deficit in January after a EUR 5.6 billion shortfall in December.  Monthly export growth of 2.9% was more than twice as great as the 1.3% increase in imports.  The trade balance swung to a EUR 81.1 billion surplus last year from a EUR 15.7 billion deficit in 2011, as exports went up 7.4% while imports rose just 1.8%.  The energy deficit widened 28.4 billion euros, while all other trade generated a surplus that was EUR 125.2 billion larger than in 2011.  Member trade positions in 2012 ranged from surpluses of EUR 186.7 billion in Germany, EUR 50.5 billion in the Netherlands, and EUR 42.3 billion in Ireland to deficits of EUR 81.5 billion in France, EUR 31.8 billion in Spain, EUR 20.0 billion in Greece.

Consumer confidence in New Zealand settled back 0.3 points to print at 110.8 this quarter.  New Zealand’s service sector PMI improved to 55.5 in February after printing at 52.8 in January.  Australian auto sales were unchanged on month but 9.4% greater on year in February.

Unemployment in Hong Kong remained steady at 3.4% in February.  The 12-month rate of decline in South Korean producer prices held steady at 1.6% in February.  Non-oil Singapore exports plunged 30.6% between February 2012 and February 2013.  Singapore’s trade surplus last month totaled SGD 2.5 billion.

Property prices in China rose 2.1% last month.

The Swiss Government revised macroeconomic forecasts only marginally.  It now expects GDP to advance 1.3% this year and 2.1% in 2014.  Officials predict a rise of consumer prices of 0.1% in 2013 and 0.2% in 2014.  A 3.3% jobless rate is forecast for 2013.

The Dutch current account surplus widened 29.6% on quarter to EUR 17.1 billion in 4Q12.

Britain’s Rightmove index of home prices posted on-month and on-year upticks in March of 1.7% and 1.2%.  The latter compares to 1.1% in the year to February.

The U.S. National Association of Home Builders reports its monthly housing market index today.  Canada releases data on security transactions.  Chilean GDP is due.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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