Watch out below, Cyprus edition
Posted by Charles II on March 17, 2013
Asian markets look to be headed down 2% (as Hong Kong and Japan are as of ca. midnight Eastern), while S&P futures are down 1.4%.
A correction by 8% would get the S&P to the 200 day moving average, while a correction of 12% would bring it to a Fibonacci level. The immediate cause of this is the EU’s screw-up with Cyprus
Ansuya Harjani, CNBC:
After a period of what some experts have called “irrational exuberance” in global markets, the weekend decision by the euro zone to force bank depositors in Cyprus to contribute towards a bailout provided a stark reality check for investors on Monday.
Investors are concerned that taxing depositors will set a dangerous precedent for the euro zone and ultimately risk runs on regional banks. The strategy may also provoke depositors in other debt-ridden nations to shift their money to “safer” European banks.
“The madness of this decision about Cyprus is unfathomable. We expect runs on Cypriot banks when they open on Tuesday [Monday being a bank holiday]. No sensible foreign depositor would continue to keep money in a banking system that just took nearly 10 percent of his deposit without any notice,” David. Kotok, chairman and chief investment officer, Cumberland Advisors wrote in a note to clients.
Update. As PW says, the word is that the Cypriot banks are being targeted because Cyprus has become a money laundering center for Russian enterprises.
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