Global markets slump on Cyprus bailout plan

A plan to tax Cypriots' bank accounts to help fund a bailout for the debt-laden euro zone country weighed on financial markets on both sides of the Atlantic, a poignant reminder of the ongoing risks the European crisis poses to the economy worldwide.

Cyprus lawmakers will vote as early as Tuesday on a proposal to use bank deposits of Cypriots to pay for a financial rescue needed to avoid the nation's bankruptcy. However, after initial details released on the weekend triggered protests, the burden on small depositors may be eased.

The vote was originally scheduled for today. In a bid to prevent a run on Cypriot banks, they will remain closed for at least another two days.

"The issue ultimately for investors is: 'Is this going to cause contagion?'," Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey, told Reuters.

In afternoon trading in New York, the Dow Jones Industrial Average fell 0.11 per cent to 14,498.40, after dropping as low as 14,404.21 earlier in the session, while the Standard & Poor's 500 Index declined 0.32 per cent to 1,555.72, recovering from the day's low of 1,545.13. The Nasdaq Composite Index eased 0.20 per cent.

In Europe, the Stoxx 600 Index finished with a decline of 0.2 per cent from the previous close. In London, the FTSE 100 fell 0.5 per cent as did the CAC 40 in Paris, while the DAX gave up 0.4 per cent in Frankfurt.

The euro weakened 0.7 per cent against the greenback and dropped 0.9 per cent against the yen.

Shares of Apple gained, last up 2.3 per cent. The company will probably lift its quarterly dividend 56 per cent to US$4.14 a share, for an annual payout of US$15.7 billion, according to the average estimate from six analysts surveyed by Bloomberg. The resulting yield of 3.7 per cent would be higher than 86 per cent of the companies in the S&P 500 paying dividends.

In economic news, the National Association of Home Builders/Wells Fargo index of builder confidence unexpectedly fell 2 points to 44 this month. It's the first of a slew of housing data to be released in the coming days-most of which is expected to show that the sector is gaining momentum.

"In addition to tight credit and below-price appraisals, home building is beginning to suffer growth pains as the infrastructure that supports it tries to re-establish itself," NAHB chief economist David Crowe said in a statement.

"During the Great Recession, the industry lost home building firms, building material production capacity, workers who retreated to other sectors and the pipeline of developed lots. The road to a housing recovery will be a bumpy one until these issues are addressed, but in the meantime, builders are much more optimistic today than they were at this time last year."

The Fed's key policymakers begin a regularly scheduled two-day meeting tomorrow.