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 bail-out deadline for Cyprus falls on Monday; if no deal is reached the European Central Bank (ECB) could cut off support for Cypriot banks. That outcome could increase market volatility and affect investor confidence in European banking shares and the wider region.
If the ECB stops emergency funding, Cyprus banks could face severe liquidity problems, which may spill over into broader eurozone markets and raise risk sentiment. Everyday investors might see higher volatility in European bank stocks, currency moves and cautious trading until a deal is reached.
Despite concerns about Cyprus potentially needing a €10 billion emergency loan, futures markets on Sunday were indicating positive openings—such as the local bourse +24 points (0.5%) and the S&P 500 likely +12.9 points—suggesting traders were optimistic that a deal or limited fallout was possible.
The article reported futures showing the local bourse up about 24 points (0.5%), the S&P 500 likely to open 12.9 points higher, Europe +2 points, London +81 points and Japan +60 points, indicating expected broad gains at the open.
Olli Rehn said Cypriot leaders needed to strike a deal to avoid bankruptcy and welcomed progress toward meeting EU and IMF reform demands, including raising €5.8 billion to unlock €10 billion in loans. Investors should view this as a sign policymakers were pushing for solutions, but that only hard choices remained.
German Finance Minister Wolfgang Schaeuble warned Cyprus must meet the terms of the proposed rescue package if it wanted to stay in the eurozone. For investors, this underscores that political and conditional aspects of any bailout can shape market outcomes and the stability of eurozone assets.
The dollar closed near a seven-week high (about US104.28¢) as expectations of further Reserve Bank rate cuts diminished. For Australian investors, a stronger dollar can affect the value of international investments, import prices and currency-sensitive sectors.
The article noted RBA Governor Glenn Stevens would speak at the ASIC annual forum and the RBA's semi-annual Financial Stability Review was due the following Thursday. These events could provide guidance on Australia’s monetary outlook and indicate whether financial conditions at home are in relatively good shape, which matters for local investors.
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