By Sarah Turner, MarketWatch
SYDNEY (MarketWatch) -- Asia stocks reacted badly on Monday to
details of a bailout of Cyprus over the weekend -- with U.S.
stock-index futures and the euro also sharply lower -- as investors
fretted about the potential implications of a decision to levy
private bank deposits.
Japan's Nikkei Stock Average tumbled 2.1%, South Korea's Kospi
lost 0.7%, and Australia's S&P/ASX 200 index fell 1.5%.
In Chinese trading, the Hang Seng Index dropped 1.7%, while the
Shanghai Composite Index gave up 0.7%.
U.S. index futures also took a hit, as the Dow Jones Industrial
Average (DJI) contract traded 138 points, or 1%, lower at 14,295.
Nasdaq (RIXF) futures fell 34.25 points, or 1.2%, to 2,756.25,
while those for the S&P 500 (SPX) lost 20 points, or 1.3%, to
1,533.60.
In the currency markets, the euro (EURUSD) fell sharply to
$1.2895 in Asian trading hours Monday, down from $1.3076 in late
North American trading Friday.
The losses for Asian stocks and other securities came after
Cyprus announced plans for a one-off levy on bank deposits in
exchange for equity in the banks as part of a deal that would have
international creditors provide 10 billion euros ($12.9 billion) to
shore up the island nation's finances.
Under the bailout, Cyprus would also sell government assets,
raise corporate tax rates and impose a tax on interest earned in
Cypriot banks.
The move would mark the first time in the euro-zone debt crisis
that private citizens' bank deposits would be tapped, and Morgan
Stanley said the introduction of the levy "seems to have broken
another taboo."
The strategists went on to question whether "senior bank debt is
the next taboo to be broken, given the linkage with deposits."
Morgan Stanley recommended selling high-beta banks and said
that, broadly, "investors should expect material market weakness in
the near term." ((Read more analyst reaction to the Cyprus deposit
levy:
http://blogs.marketwatch.com/thetell/2013/03/17/cyprus-deposit-levy-shakes-up-markets/.))
Asia movers
In Hong Kong, the Hang Seng Index's top-weighted component --
London-based HSBC Holdings PLC (HBC)(HBC)-- fell 2.4%, with the
Financial Times also reporting that the bank is planning "thousands
more job cuts."
Other Hong Kong-listed financial shares also showed weakness,
with Agricultural Bank of China Ltd. (ACGBF) down 2.1%, China
Merchants Bank Co. (600036.SH) off 1.8% and broker Haitong
Securities Co. losing 2.4%.
The volatile property sector also fell n Hong Kong, with New
World Development Co. (NDVLF) losing 2.9%, and China Overseas Land
& Investment Ltd. (0688.HK) down 2.6% ahead of its earnings
report due later in the day.
With the Cyprus news weighing on global markets, the Japanese
yen (USDJPY) regained some safe-haven interest, sending the U.S.
dollar back below the Yen95 mark.
Amid a rising yen and worries of another flare-up in the
European debt crisis, Sony Corp. (SNE) fell 4.2%, Tokyo Electron
Ltd. (TOELY) dropped 4.8%, Toyota Motor Corp. (TM) lost 2.3%, and
Mitsubishi Motors Corp. (MMTOY) retreated 3.7%.
Gold futures rose $3.20 to $1,595.70 an ounce, but copper lost 7
cents to $3.45 a pound, helping to make Australian mining stocks
among the worst performers in Sydney on Monday.
Among the majors, Rio Tinto Ltd (RIO) dropped 2%, while BHP
Billition Ltd. (BHP) fell 1.9%.
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