Australia: Cyprus bailout threatens market momentum
15.21 AEDT, Monday 18 March 2013
Cyprus bailout threatens market
By Tim Waterer (Senior Trader, CMC Markets)
There is a heightened sense of anxiety among traders to start the week with the Cyprus bailout conditions posing a potential threat to market momentum.
It was not just the Cypress debt itself that upset markets today, but more so the connotations this situation may have when it comes to other more significant bailouts that may be required in the region. With a potential spanner thrown in the works of the Eurozone recovery, risk assets were on the retreat today with traders awaiting clarification of the longer term impact this may have.
With European debt issues again in the headlines, there was no shortage of red numbers across Asian markets today. The uncertainty created by the Cyrpus bailout conditions regarding the impact on deposit holders had traders very much inclined to be in a selling frame of mind today, which was evidenced by the steep falls racked up on all the major Asian bourses.
The ASX200 has certainly not been doing anything by half measures for the last three trading days, with the index prone to some pretty sizable daily moves. There was a hefty move to the downside today on the Australian market which was in accordance with other key markets in the region in reaction to the uncertainty served up by the Cyprus bailout situation. As a result, bright spots on the local market were few and far between with all the major sectors posting losses as traders succumbed to the latest bout of frisk aversion emanating from Europe.
The Euro was shown little mercy by traders today with the currency sold off heavily at the outset. Higher yielding currencies also followed suit. Gold received some increased buying flows as part of a safe haven play from investors. The AUD sank around half a cent due to its particularly risk-sensitive nature.
This latest issue concerning Cyrpus may provide the market with some short term pain however it is also possible that the downside reaction experienced today could be short lived. With an FOMC statement due later this week attention may shift back to the growth story that is playing out in the US economy. This could ease some of the general anxiety which has plagued financial markets today.