Cyprus deadline to set the tone, but share investors optimistic
But futures markets were pointing to gains across Europe, the US and Asia when markets open on Monday, despite fears that Cyprus could be forced out of the eurozone if it fails to access a €10 billion ($12.4 billion) emergency loan.
On Sunday the futures market was indicating the local bourse would open 24 points higher, or 0.5 per cent, following a small rise of 7.9 points last Friday.
In the US, the S&P500 was likely to open 12.9 points higher, Europe (+2 points), London (+81 points) and Japan (+60 points) were also expected to open higher.
European Union economic chief Olli Rehn said at the weekend that Cypriot leaders needed to strike a crucial deal in Brussels on Sunday night (Monday, local time) to prevent the country becoming bankrupt. He also welcomed the "progress" Cyprus had made toward meeting demands from the European Union and International Monetary Fund for reform its financial sector and to raise €5.8 billion to unlock €10 billion in desperately needed emergency loans.
But it was a make-or-break meeting between Cypriot leaders and eurozone finance ministers, he said.
"Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available," Mr Rehn said. "Today, there are only hard choices left."
Cypriot leaders faced hard choices to try to limit the economic damage from the blow to its bloated banking sector after a firestorm of protest over EU plans to impose a special levy on bank accounts, he said.
German Finance Minister Wolfgang Schaeuble also warned that Cyprus had to meet the terms of the proposed rescue package if it wanted to stay in the eurozone.
The dollar closed near a seven-week high on Friday, at US104.28¢, as expectations of further Reserve Bank rate cuts diminished after this month's board meeting.
On Tuesday Reserve Bank governor Glenn Stevens will deliver a speech at the Australian Securities and Investments Commission annual forum on what Australia's role should be in shaping ideas about regulation on the international stage.
On Thursday the Reserve Bank's semi-annual Financial Stability Review is expected to provide an indication that financial conditions in Australia are in relatively good shape, economists said.
Frequently Asked Questions about this Article…
The article says a crucial bailout deadline for Cyprus falls on Monday. If no deal is reached, the European Central Bank could cut off support for Cypriot banks, raising risks of bankruptcy and possible exit from the eurozone — events that can drive volatility in European and global markets.
Despite the Cyprus deadline, futures markets were pointing to gains: the local bourse was indicated to open about 24 points (0.5%) higher, the S&P 500 futures were around 12.9 points up, Europe +2 points, London +81 points and Japan +60 points. For everyday investors this suggested markets were relatively optimistic at the open even amid political and banking uncertainty.
European Union economic chief Olli Rehn said Cyprus needed to make reforms to its financial sector and raise about €5.8 billion to unlock the larger €10 billion emergency loan from EU and IMF lenders. The article describes a make-or-break meeting between Cypriot leaders and eurozone finance ministers to agree those terms.
The article notes fears that Cyprus could be forced out of the eurozone if it fails to access the emergency loan. German Finance Minister Wolfgang Schaeuble warned Cyprus would have to meet the rescue package terms if it wanted to remain in the eurozone, highlighting the political as well as economic stakes.
EU plans to impose a special levy on bank accounts in Cyprus triggered widespread protests. The levy was linked to efforts to address the country's bloated banking sector; the strong public backlash added pressure on Cypriot leaders and complicated attempts to limit economic damage.
Olli Rehn said Cyprus had made progress toward meeting demands but warned there were 'no longer any optimal solutions' and only 'hard choices' remained. That language signalled the seriousness of the situation and that tough fiscal and banking reforms would be required.
The article reports the dollar closed near a seven-week high (US104.28¢) as expectations of further Reserve Bank rate cuts diminished. At the same time, futures suggested stock markets in the US, Europe, UK and Asia were set to open higher, indicating a degree of investor optimism despite the Cyprus risk.
The article notes Reserve Bank governor Glenn Stevens was scheduled to speak at the ASIC annual forum about Australia’s role in shaping international regulation, and the RBA's semi-annual Financial Stability Review was due to signal that financial conditions in Australia were relatively healthy — both events that could influence Australian and regional investor sentiment.
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