Market update: Developments on Cyprus raise alarm bells in global markets

The head of the eurogroup of eurozone finance ministers, Jeroen Dijsselbloem, rocked the markets on Monday afternoon with comments that seemed to imply the Cyprus model for rescuing banks — where private investors are to bear the brunt of the burden — would become a template for other European nations. Although he clarified his statement later on, that Cyprus was an exceptional case, the damage was already done. Wall Street stocks erased earlier gains to finish the day in the red with the Dow Jones closing down 0.4% while both the S&P 500 and Nasdaq slipped 0.3%. Not surprisingly, banking sector shares were the biggest decliners.

Asian markets also showed their concerns in overnight trading. Stock losses in Japan, however, were pared back by a sliding yen following the announcement by the Bank of Japan governor that the central bank would increase asset purchases (Nikkei 225  0.6%). China’s Shanghai Composite fell further ( 1.3%) on additional domestic worries regarding recent property curbs, which could hurt corporate profits. European markets were holding steady this morning with major indices remaining more or less flat at the time of writing and growth-focused stocks struggling for direction. Safe haven purchases were back on the table with investors turning to core fixed income assets such as bunds and US Treasuries.