Contagion Fears Over Cyprus Bank Levy Spread to US
Minyanville StaffMar 18, 2013 5:20 pm
Today's financial recap and tomorrow's financial outlook.
The market action today was dominated by headlines about Cyprus, which over the weekend, levied a tax against depositors in Cypriot banks. Accounts with less than 100,000 euros in deposits would receive a 6.75% tax while accounts over 100,000 would receive a 9.9% tax. The levy sparked fears of currency devaluation flows and spreading bank runs. However, European markets fell by less than 1% as they had been under pressure for the past two months. In the US, the uncertainty over the contagion effect in Cyprus prompted a 20-point drop in S&P futures at their 6:30 p.m. EDT open on Sunday night, but quickly rallied back by the the time equities opened for trading on Monday morning. The S&P 500 closed the day down after nearly reaching the unchanged mark.
The NAHB homebuilder sentiment survey dropped to a reading of 44 in March from last month's 46, well below the expected 47 reading. This is the second straight decline after 10 straight months of increases. The NAHB index is a survey of sales expectations for real estate agents and homebuilders.
Overnight, Chinese markets were weaker as Chinese property prices rose in 62 of 70 regions in February. This positive news was perceived as a negative. The Shanghai Composite fell 1.68% as the potential for monetary tightening increased. The industrial metals also didn't help the Asian stock sell-off. Copper was down 2.59% while palladium was down 1.72%. Gold also rose 0.72% as money sought safe haven assets.
Tomorrow's Financial Outlook
We will receive more housing data tomorrow morning in the form of February housing starts and building permits. Last month, housing starts showed a surprise decline to a seasonally adjusted annual rate of 890,000 from 973,000 in December. This month, economists expect that starts will expand to an annual rate of 915,000. Correspondingly, permits will remain unchanged at an annual rate of 925,000.
Globally, the UK will release producer and consumer inflation data, with the latter being key for the Bank of England's future policy decisions. Lately, the central bank has been hampered by rising inflation costs. Also, the ZEW institute will release its economic sentiment survey for the eurozone.
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