SYDNEY — Share markets across most of
Asia and the euro struggled on Wednesday after a bail-out plan for
Cyprus fell into disarray, but losses were limited as investors clung to
hopes that a last-minute deal will be hammered out.
Cyprus’s parliament overwhelmingly
rejected a proposed tax on bank deposits as a condition for aid, pushing
the Mediterranean island a step closer to the brink of financial
meltdown.
The European Central Bank (ECB) offered
some comfort by saying it was committed to providing liquidity within
certain limits, even after having threatened to end emergency lending
assistance for teetering Cypriot banks.
“It is relatively calm for now, but headline risks remain acute,” said Sue Trinh, strategist at RBC in Hong Kong.
“Clearly the ‘no’ vote was not an ideal
situation. The government now has to scramble for last-minute options
and it remains uncertain how exactly it will unfold.”
The finance minister of Cyprus is in
Moscow to scout for support amid speculation Russia could step up, while
newly elected President Nicos Anastasiades is due to meet party leaders
on Wednesday to explore a way forward.
The MSCI’s broadest index of
Asia-Pacific shares outside Japan eased 0.2%, having earlier carved out a
fresh 2013 trough. The index is now about 3% lower from this year’s
peak, set a month ago.
Among the biggest losers, South Korea’s
Kospi fell 1.0%, Australia’s S&P/ASX 200 index shed 0.4% and
Taiwan’s Taiex lost 0.5%. India’s BSE index was down 0.4%.
Bucking the region’s weakness, Hong Kong
stocks bounced off a three-month low thanks to a rally in Chinese
shares as more clarity about recently announced property curbs at home
eased investor uncertainty.
Japanese financial markets were shut for a holiday.
The lacklustre performance in Asia mirrored Wall Street, and was unlikely to inspire European bourses.
Jonathan Sudaria, a dealer at Capital
Spreads in London, suspects European equity markets will open flat with
traders preferring to sit on the sidelines for now.
“Markets are set to open in a state of
stasis as traders wait for a raft of news releases to be announced
before deciding on the next leg higher or lower,” he said in a note.
Commodity markets were also calmer with
Brent crude recovering from a three-month low and copper off a
seven-month trough. Spot gold, meanwhile, held near a three-week high.
Euro sulks
Uncertainty surrounding Cyprus kept the
euro pinned near four-month lows against the dollar. The euro fetched
$1.2876, having fallen as far as $1.2844 overnight.
The common currency lost ground against
the yen as well, shedding 0.2% to ¥122.39, near a two-week low of
¥121.45 plumbed on Monday.
Yen bulls, however, will be wary of any comments from Haruhiko Kuroda, who becomes governor of the Bank of Japan on Wednesday.
Expectation that Mr Kuroda will quickly
embark on a much more aggressive monetary policy to fight deflation have
recently pushed the yen to multiyear lows versus the euro and dollar.
The dollar index, which tracks the
greenback’s performance against a basket of currencies, was flat at
82.979 hovering not far from a seven-month peak of 83.166 set a few days
ago.
Investors will also keep an eye on the outcome of the Federal Reserve’s two-day policy meeting due to end later on Wednesday.
Analysts expect the Fed to keep buying
$85 billion a month in mortgage and Treasury bonds to encourage
investment and bolster a weak economic recovery.
“Overall, we expect the Fed to maintain
its stance on asset purchases and forward guidance. At the press
conference, we expect the chairman to continue to downplay the costs of
asset purchases while highlighting the benefits,” analysts at Barclays
Capital wrote in a client note.
“With the Fed having shifted to
unemployment rate-based guidance, the chairman’s views on the overall
labour market conditions, which take into account a broader set of
indicators, would be parsed.”…Read Article
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