Asian markets fall amid fears over Cyprus bailout deal
(about 1 hour later)
Global markets are due to react to the Cyprus bailout plans, as international exchanges prepare to open.
Asian markets have dipped after Cyprus bailout plans triggered fears of an escalation of the eurozone debt crisis.
The EU and IMF want all bank customers to pay a levy in return for a bailout worth 10bn euros ($13bn; £8.6bn).
The EU and IMF want all bank customers to pay a levy in return for a bailout worth 10bn euros ($13bn; £8.6bn).
Analysts say bank share prices and the bond markets may come under pressure, but the deal is unlikely to cause ructions on global markets.
The plan is yet to be finalised, but the news of the deal caused a rush to the cash machines as people tried to withdraw money.
The plan is not yet finalised, with Cyprus's leaders saying they want to ensure protection for small investors.
Japan's Nikkei 225 index fell 1.8%, Australia's ASX 200 dipped 1.3% and South Korea's Kospi was down 0.4%.
Also, Germany must approve the plan but is not due to vote until next month.
Analysts said that investors were sceptical about how the developments in Cyprus may affect other bigger eurozone economies which may also need bailout funds in the future.
Holger Schmieding, chief economist at Berenberg Bank, said that the unprecedented move to make depositors contribute to the bailout put the eurozone in unchartered territory.
The big fear being that, if approved, the plan may set a precedence for those countries.
But he added: "We are optimistic that it will not spark massive contagion."
"There will certainly be confusion in Cyprus and investors looking just at headlines may fret about its case becoming a model," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.
Under the levy, bank customers with less than 100,000 euros would have to pay 6.75%, those with more than 100,000 euros would pay 9.9%.
'Risk aversion'
News of the deal caused a rush to the cash machines as people tried to withdraw money.
The developments in Cyprus also had an impact on the currency markets.
However, depositors in Cypriot banks outside the country, including in Greece, are unaffected by the levy.
The euro fell nearly 3% against the the Japanese yen. It was trading as low as 121.58 yen to the euro in Asian trade on Monday, down from 124.93 yen on Friday in New York.
Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics, said the fact that negotiators from the European Central Bank and European Union were prepared to see depositors tapped for money suggested they were confident there would not be a bank run elsewhere.
The single currency also dipped to a three-week low against the US dollar. It was trading at $1.2895, down from late Friday's level of around $1.30.
And in a research note published on Sunday, analysts at Barclays said: "We consider the likelihood of a bank run in other periphery countries to be limited, including in Greece."
Meanwhile, the Japanese currency, considered by many as a safe haven asset in times of uncertainty, also gained against the US dollar.
'Bad precedent'
It rose as high as 93.45 yen against the US dollar on Monday, from 96.11 yen on Friday.
However, MEP Sharon Bowles, who chairs the European Parliament's Economic and Monetary Affairs Committee, said a panic reaction in some of the eurozone's peripheral countries could not be discounted.
Analysts said the fresh concerns over eurozone debt crisis, triggered by the developments in Cyprus, had resulted in investors looking to ditch relatively riskier assets.
She told the BBC that making savers share the burden set "a very bad precedent".
"The week has started with a clear rise in risk aversion, following the surprise weekend decision in Brussels to slug all depositors in Cypriot banks with a levy in order to approve euro 10bn bailout funds," said Sean Callow, a senior currency strategist at Westpac.
Annalisa Piazza, of Newedge Strategy, was also concerned about the fallout.
"The unprecedented move is an extreme measure, and in our view it will spread some panic... we cannot rule out some capital outflows," she said.
"In the short-run we expect some effects on periphery's [bond yield] spreads and some weakening of the euro cannot be ruled out."
Following eurozone finance ministers' negotiations last week, Cyprus became the fifth euro area country to get a bailout to save its banks, which suffered significant losses because of their exposure to Greek debt.
It is the first time the 17-nation eurozone has sanctioned dipping into people's savings to finance a bailout.
A Cyprus parliamentary vote on the bailout was postponed until Monday.
