Market update: Cyprus continues to drag on stocks

Wall Street fell on Thursday as concerns about a Cyprus bailout deepened and overshadowed increasing signs that the US economy is growing slowly but surely. US jobs news was encouraging, with a continuation of the downward trend in initial unemployment claims. National Association of Realtors data showed an increase of 2,000 to 336,000 claims in the week to 16 March. Sales of existing homes in February accelerated by 0.8% annualised, its fastest pace in three years as borrowing costs fell. Meanwhile, the Conference Board Leading Economic Index, which measures key economic indicators rose by 0.2% in February, following a 1% fall in January. The S&P500, the Dow and the Nasdaq ended Thursday’s trading session down 0.8%, 0.6% and 1% respectively.

In European markets, yesterday’s weakness continued this morning. The FTSE Eurofirst 300 is down 0.3% while the FTSE 100 is flat. Cyprus has been given a Monday deadline to raise the funds it needs for an international bailout and avoid a collapse of its financial system and a potential exit from the euro. Yesterday, credit rating agency Standard & Poor's downgraded Cyprus' sovereign credit rating further, from CCC-plus to CCC. Adding to the pessimism, the Munich-based Ifo Institute business climate index unexpectedly fell for the first time in five months, falling from 107.4 last month to 106.7 in March.