Cyprus fears outweigh US housing gains on Wall St

Concern about Europe's squabbling over a palatable plan to save Cyprus from financial collapse weighed on Wall Street, even as the latest US housing data showed further signs of a sustainable recovery in the industry.

Cyprus President Nicos Anastasiades said that lawmakers are likely to reject a plan to tax bank deposits, even as it was amended to protect those with the least savings. The timing of the vote is uncertain.

The European Union and International Monetary Fund want Cyprus to fund 5.8 billion euros of a 10 billion euro bailout through a levy on bank deposits, an unprecedented demand that has prompted both riots in the nation and concern well beyond its borders.

EU officials including Dutch Finance Minister Jeroen Dijsselbloem, who chairs the group of euro zone finance ministers, and Deutsche Bank Chief Executive Anshu Jain have said that bank deposits in other euro zone member nations are safe from similar bailout conditions as currently demanded from those in Cyprus.

The euro shed 0.5 per cent against the US dollar. Europe's Stoxx 600 Index ended the day with a 0.4 per cent slide from the previous close. In Greece, the ASE Index sank 3.9 per cent as the market opened after Monday's national holiday with shares of National Bank of Greece plunging 15 per cent.

Benchmark indexes in France, Germany, and the UK weakened, closing 1.2 per cent, 0.8 per cent, and 0.4 per cent lower respectively.

"Cyprus begins to lift the veil on how Brussels works," Michael O'Sullivan, head of portfolio strategy at Credit Suisse Private Banking in London, told Bloomberg. "One of the pillars of banking reform across Europe was depositor insurance, and that's now unfortunately off the table. For other peripheral countries, there may be more bank refinancing to come."

There was good news on the American real estate market. Housing starts climbed 0.8 per cent in February to a 917,000 annual rate, from a revised 910,000 the previous month. Permits for future construction jumped 4.6 per cent to a 946,000 rate, the best since June 2008.

"Housing will be a major contributor not just to GDP growth, but also to job creation," Dan Heckman, a fixed income strategist at The Private Client Reserve at US Bank in Kansas City, Missouri, told Reuters.

In afternoon trading in New York, the Dow Jones Industrial Average shed 0.28 per cent, while the Standard & Poor's 500 Index dropped 0.42 per cent, and the Nasdaq Composite Index fell 0.52 per cent.

Shares of drugstore retailer Walgreen gained, last up 3.8 per cent, as did those of AmerisourceBergen, last up 5 per cent, after the two agreed to a 10-year partnership and the potential for Walgreen to buy a stake in AmerisourceBergen.

The Fed's key policymakers began a regularly scheduled two-day meeting today.

- BusinessDesk

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