European stocks slide as Cyprus bailout teeters

Europe's main stock markets suffered further losses and the euro slid on Tuesday as Cyprus' international bailout appeared close to unravelling.

London's FTSE 100 index of leading companies slid 0.26 percent to close at 6,441.32 points, while in Frankfurt the DAX 30 dropped 0.79 percent to 7,947.79 points and Paris' CAC 40 shed 1.30 percent to 3,775.75 points.

Elsewhere, Madrid's IBEX 35 shares index tumbled 2.2 percent and Milan's FTSE MIB sank 1.59 percent in value.

In foreign exchange activity, the European single currency slid to $1.2873, from $1.2957 in New York late on Monday, to hit its lowest level since November 22.

Gold prices meanwhile rose to $1,610.75 an ounce on the London Bullion Market from $1,595.50 on Monday.

Controversial plans by Cyprus to impose a stiff levy on bank savings to unlock an international bailout had pushed global share prices lower and sent the euro tumbling the previous day.

The market turmoil and an angry backlash at home prompted Cypriot officials Tuesday to amend the plan to shield small savers.

But the changes would likely leave the country short of the 5.8 billion euros ($7.5 billion) it must raise to unlock a 10-billion-euro bailout from the EU and IMF, and the ruling party said it would abstain from the vote in the parliament.

There were reports the vote may be delayed as President Nicos Anastasiades called an emergency meeting of party leaders for Wednesday to examine alternative plans.

"This political turmoil and parliamentary impasse now raises the real risk that EU policymakers may be faced with a very real decision as to whether they need to consider pushing Cyprus out of the euro area, and as such run the risk of a contagion effect across the region," said CMC Markets analyst Michael Hewson.

"It would seem a very high price to pay for the sake of an amount of five billion euros," he added.

Contagion concerns pushed the Spanish government's long-term borrowing costs back above 5.0 percent. The yield on its 10-year bonds rose to 5.024 percent in secondary trading from 4.962 percent on Monday.

The yield on 10-year Italian government bonds rose to 4.704 percent from 4.634 percent.

US stocks initially rose on a report on US housing starts that suggested more momentum in the housing sector recovery, but turned down on Cyprus-related worries.

In midday trade the Dow Jones Industrial Average was off 0.20 percent at 14,423.10 points.

The broad-based S&P 500 shed 0.50 percent to 1,544.41, while the tech-rich Nasdaq Composite Index fell 0.46 percent to 3,222.68.

Asian equities had mostly rebounded on Tuesday while the yen fell against the dollar and euro on news that Cyprus was reworking the savings levy.

But the details led to renewed uncertainty to hang over European trading.

Cyprus' government sent to parliament Tuesday a revised plan that dropped the levy on bank savings below 20,000 euros to spare small savers.

It retained a levy of 6.75 percent on deposits of 20,000-100,000 euros and one of 9.9 percent for amounts above 100,000.

But central bank governor Panicos Demetriades warned that the changes would leave Cyprus short of the amount needed to secure the EU-IMF bailout.

Cyprus was also seeking to convince Russia to extend its existing bailout loan, which officials would ease the country's debt repayment schedule.

Banking shares took the largest hits in European trading.

In Madrid, Spanish bank Santander fell 3.64 percent to 5.618 euros, UniCredit in Italy dropped 2.83 percent to 1.166 euros.

Elsewhere, BNP Paribas had lost 4.2 percent to 40.95 euros in Paris and Barclays bank was down by 2.76 percent in London at 297.50 pence. In Germany, Deutsche Bank shares tumbled 4.35 percent to 32.00 euros.

burs-rl/wai

http://www.globalpost.com/dispatch/news/afp/130319/european-stocks-slide-cyprus-bailout-teeters