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Europe: negative close as Cyprus impasse unresolved

Anna Kalmykova, Analyst, Global Markets (Finam)

On Friday, March 22, European equities saw a modest decline. Investors were in risk-off mode ahead of the looming deadline for the Cyprus bailout agreement. In addition, Germany released weaker-than-expected macro data, with the IFO Business Climate Index dropping to 106.7 in March from 107.4 a month earlier, while analysts, on average, had projected a rise to 107.6.

According to media reports, it was only on Sunday night that Cyprus managed to broker a tentative agreement with the troika of international lenders to secure a EUR 10 bn bailout in return for a slate of harsh austerity measures during a marathon summit of the Eurogroup in Brussels. Specifically, uninsured deposits over EUR 100,000 held in either of the two biggest Cypriot banks Popular Bank of Cyprus and Bank of Cyprus will be frozen and taxed at a rate, which, according to a knowledgeable source, could reach as much as 40%, while the former of the above lenders is to be wound down. A bright spot was news that deposits under EUR 100,000 will not be affected and will be assigned to the so-called “good bank”.

As for the indexes, the regional STXE 600 slid 0.15% to close at 294.04. Britain’s FTSE 100 edged up 0.07%. Germany’s DAX eased 0.27%, while France’s CAC 40 gave up 0.12%.

Germany’s truck producer Man sank 2.6% after Volkswagen announced plans to buy the rest of its shares for EUR 80.89 apiece. To remind, VW already owns a 75.03% stake in Man.

Germany’s largest developer Hochtief slumped 5.3% after reports Stephen Johns, chairman of Australia’s Leighton Holdings, stepped down, citing the conflict with its major shareholder Hochtief.

Britain’s Homeserve, which offers repair services, dove 5.2% after announcing layoffs on the domestic market amid sagging demand.

Norwegian salmon feed producer Marine Harvest climbed 3% after being upgraded from Buy to Strong Buy by analysts at Nordea Securities, citing higher-than-expected salmon price across European and US markets. British oil major BP jumped 1.9% on the announced buyback of USD 8 bn of its shares after the purchase of a 50% interest in Russia’s oil company TNK-BP.

By 7.25 GMT key regional indexes were on a northward track after Cyprus managed to clinch a bailout deal with international lenders.

Germany’s DAX futures for June delivery were 1.02% higher, Britain’s June FTSE 100 futures were up 0.47%, while France’s April CAC 40 futures were 1.54% higher.