The share market is set to reverse some of yesterday's plunge after traders snapped up sold-down stocks in the US and Europe as panic over a Cyprus bailout plan waxed and waned.
The March SPI 200 futures contract ended the night session 37 points or 0.7% higher at 5043, which suggests the benchmark share index will recoup roughly a third of yesterday's 105-point dive, its second heaviest in nine months.
Shares in the US and Europe tumbled at last night's open but finished off their lows as traders "bought the dip". The Dow briefly broke even before falling away again after Greek TV reported that Cyprus president Nicos Anastasiades does not have the votes to pass a controversial one-off tax on bank deposits as part of an EU/IMF rescue plan. The blue-chip index pared an opening 110-point fall into a closing loss of 62 points or 0.43%. The S&P 500 lost nine points or 0.56% after an initial drop of 16 points.
Turnarounds in Europe were even more dramatic. Britain's FTSE trimmed an opening loss of 104 points into a final deficit of 32 points or 0.49%. Germany's DAX went from -141 points to -32 or 0.4%. France's CAC lost 0.5%, Italy's FTSE MIB 0.85% and Spain's IBEX 35 1.29%. Trading in Cyprus and Greece was suspended for a public holiday.
"There's so many investors in the US that are looking for pullbacks to add to this market, to add money," a director of research and fund manager at Haverford Investments in the US told Bloomberg. "Pullbacks right now are viewed as investable pullbacks, and that's what we had this morning."
The declines followed weekend news that bank depositors in Cyprus will be hit with a one-off levy as part of a $13 billion European Union/International Monetary Fund bailout plan for the debt-stricken Mediterranean nation. If the tax were to proceed, it would be the first time during the euro-zone debt crisis that private depositors have been asked to take a haircut. Fears that the announcement might spark bank runs in other debtor nations, including Italy and Spain, proved unfounded as politicians and bankers in both countries dismissed any similarities to the Cypriot situation.
The recovery on Wall Street peaked just before Greek TV station Antenna reported that Cyprus president Anastasiades will tell EU finance ministers this morning that the bailout deal will not pass parliament in its present form. A parliamentary vote due to take place tonight has been postponed until later in the week, prolonging the uncertainty.
Financials were the biggest "fall-guys" on both sides of the Atlantic as traders contemplated the impact on the banking system if the Cypriot plan proceeds. Resource stocks were also hit, despite a mixed night on commodity markets.
Oil maintained its close relationship with US equities, turning positive late in the session. West Texas crude for April delivery was lately ahead 26 cents or 0.3% at US$93.71 a barrel after bouncing off a low of US$$91.76.
Gold settled above US$1,600 an ounce for the first time since late February as investors sought havens in which to park their cash. Gold for April delivery was lately up $10.90 or 0.7% at US$1,603.50 an ounce.
Copper plunged to a four-month low as base metals met significant selling following declines yesterday in Asian share markets. US copper for May delivery was recently off 11 cents or 3% at US$3.41 a pound. In London, copper dropped 2.9%, aluminium 1.6%, lead 1.9%, nickel 1.8%, tin 3% and zinc 1.9%.
TRADING THEMES TODAY
CHOPPY RIDE: Seatbelts on. The armchair ride on world markets is over for the time being. Wall Street had an uncertain session: opened weak, recovered and then fell away again as the likelihood of a delayed parliamentary vote in Cyprus threatens to overshadow the rest of the week's trading. After front-running the panic yesterday, our market should open higher, but after that anything could happen, depending on news bites from the EU video-conference this morning. Base metals met heavy selling overnight and that will likely weigh on the resource sector. Gold looks like one of the better places to be this morning.
ECONOMIC NEWS: The minutes from the last Reserve Bank meeting are due at 11.30am EST. The Conference Board's leading index of economic indicators for China is scheduled for 1pm. All eyes will remain on Cyprus tonight, but Europe also has economic sentiment figures scheduled. Highlights in the US include building permits and housing starts.
