This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.bbc.co.uk/news/business-21920574

The article has changed 14 times. There is an RSS feed of changes available.

Version 6 Version 7
Asian markets rise as Cyprus deal eases crisis fears Stock markets rise as Cyprus deal eases crisis fears
(about 4 hours later)
Asian stocks and the euro have risen after officials agreed a bailout deal for Cyprus, easing fears that its banking system problems may spread. European stock markets have risen after officials agreed a bailout deal for Cyprus following a week of uncertainty.
Cyprus will now get a 10bn euro ($13bn; £8.5bn) cash injection to keep its banking system running and prevent it from crashing out of the eurozone. The main markets in France and Germany were both up by about 1.5% in the first hours of trading. The euro was also up against other major currencies.
Investors had feared that its exit from the bloc may escalate the region's debt crisis and derail a global recovery. The rises followed a rally in Asian shares earlier in the day.
Shares in Japan, South Korea, Hong Kong and Australia rose on the news. Investors are hopeful that the deal struck between Cyprus, European authorities and the IMF will prevent the crisis escalating further.
"The news was what markets were waiting for, some kind of an agreement," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. Cyprus will now get 10bn euros ($13bn; £8.5bn) in bailout funds to keep its banking system running and prevent it from being forced out of the eurozone.
Japan's Nikkei 225 index rose 1.7%, South Korea's Kospi gained 1.5%, Hong Kong's Hang Seng added 0.6% and Australia's ASX200 was up 0.5%. The European Central Bank (ECB) had set a deadline of Monday to agree a deal. If this was not met, it would have cut crucial funding to Cyprus's two biggest banks.
Improving risk appetite "We've put an end to the uncertainty that has affected Cyprus and the euro in recent days," said Dutch finance minister Jeroen Dijsselbloem, who chaired the key meeting of European finance ministers on Sunday night.
A failure to reach a deal may have seen the European Central Bank cut emergency funding to Cyprus's two biggest banks, leading to an effective bankruptcy of Cyprus's government. In Paris on Monday, the Cac 40 share index was up 1.7%, while Frankfurt's Dax index rose 1.3%. London's FTSE 100 index was also up in early trading.
The fears were that such a move may prompt the country's exit from the bloc. In Asia, stock markets in Japan, South Korea, Hong Kong and Australia closed up by between 0.5% and 1.7%.
Many analysts had been concerned that Cyprus's exit may cause a loss of confidence across the eurozone and prompt investors to withdraw from other troubled economies of the bloc, such as Greece. Currency boost
These concerns had seen investors ditch the euro over the past few days in favour of other assets, such as the Japanese yen and US dollar, seen as comparatively safer. Investors were particularly encouraged by the fact that the the new deal, unlike previous agreements, does not require the approval of the Cypriot parliament.
However, news of the Cyprus deal boosted the euro. The uncertainty about the future of Cyprus in the euro was sparked when parliament rejected an original deal, which included a controversial bank levy, a week ago.
The single currency gained 0.8% against the US dollar. It was trading at $1.3044 in early Asian trade. Despite the Cypriot economy's relatively small size, many analysts had been concerned that the crisis would spread to the wider eurozone.
It rose 1.3% against the Japanese yen to trade at 123.81 yen. There were fears the country's possible exit from the euro would trigger a loss of confidence across the single currency bloc, and prompt investors to withdraw from other troubled economies, such as Greece.
News of the new agreement saw investors return to the euro, after it saw falls last week.
The currency rose sharply against the dollar, the pound and the yen following the announcement, before falling back slightly.
"This will likely limit the euro's downside, with those who shorted the euro covering their positions, and improve general risk sentiment," said Hiroshi Maeba, head of foreign exchange trading for UBS in Tokyo."This will likely limit the euro's downside, with those who shorted the euro covering their positions, and improve general risk sentiment," said Hiroshi Maeba, head of foreign exchange trading for UBS in Tokyo.
Ben le Brun, an analyst at OptionsXpress in Sydney, added that the deal was likely to have a positive impact on the oil markets as well.
"We should see some positive sentiment reverberate through energy markets overall for at least the next 24 to 48 hours," he said.
Brent Crude rose 0.3% to $108.34 per barrel in Asian trade, while US Light Crude gained 0.4% to $94.1 per barrel.
Uncertainties remainUncertainties remain
Cyprus had agreed a bailout deal with the European Union (EU) and the International Monetary Fund (IMF) last week. But despite the relief on the markets, analysts warn that significant obstacles remain as Cyprus attempts to recover from the crisis.
However, the EU and IMF had asked Cyprus to raise 5.8bn euros in order to secure the funds. The EU-IMF deal involves massive restructuring of the Cypriot banking system, as well as austerity measures and tax increases.
They had proposed that Cyprus impose a one-off levy on bank deposits in order to raise the cash, a move that triggered protests in Cyprus and resulted in savers rushing to ATM machines to withdraw their money - a move that brought fears of a run on the banks. There has also been significant public anger in Cyprus at the intervention of European authorities, and the credibility of the Cypriot government has been questioned.
The Cyprus parliament rejected the proposal last week, delaying an agreement to secure the bailout funds. The bank restructuring is also likely to mean that depositors with more than 100,000 euros are likely to lose a significant proportion of their money - possibly as much as 30-40%.
According to the latest deal, all deposits under 100,000 euros will be "fully guaranteed". "We see a risk that Cyprus' sovereign debt burden post-bailout might not be sustainable, as the country is likely to enter a deep recession caused by the shrinkage of the banking sector and severe deleveraging," warned Reinhard Cluse, an economist at UBS.
However, Laiki (Popular) Bank, the country's second-biggest, will be wound down and holders of deposits of more than 100,000 euros will face big losses.
The levy on accounts in Laiki Bank could be as high as 40%, correspondents say.
Large deposits in the Bank of Cyprus, the country's biggest bank, will also face a levy.
Jeroen Dijsselbloem, president of the Eurogroup of eurozone finance ministers, told a press conference in Brussels that the percentage to be levied on large deposits in the Bank of Cyprus will be decided in the coming weeks.
Analysts said that while the draft deal had helped ease market jitters, uncertainties surrounding its implementation were likely to hurt sentiment in the coming days.
"We might get a small relief rally if we do get one, but markets will then very quickly turn to the risk of a bank run and whether conditions for the aid will be implemented smoothly," said Greg Gibbs, senior currency strategist at Royal Bank of Scotland.