Cyprus closes in, on EU bailout U-turn on levy

In Finland, an ally of Germany in disciplining euro zone partners, European affairs minister Alexander Stubb told Reuters he was confident Cyprus would accept EU rescue terms "because there are no other options".
Cyprus is expected to make a dramatic U-turn on Saturday to avert the imminent threat of financial meltdown, having signaled it is willing to tax big savers in its stricken banks to clinch a bailout from the European Union.

The island's partners in the 17-nation euro zone scheduled a meeting for Sunday in Brussels, in a strong sign they believe a solution is near.

 

As hundreds of demonstrators faced off with riot police outside parliament late into Friday night, lawmakers inside voted to nationalize pension funds, pool state assets for a bond issue and peel good assets from bad in stricken banks.

Officials said a deal was imminent to raise 5.8 billion euros demanded by the EU in return for a 10 billion euro ($13.00 billion) lifeline, including some kind of levy on bank deposits, which could be voted on as soon as Saturday.

Without a deal by Monday, the European Central Bank has threatened to cut off cash for Cypriot banks, spelling certain collapse and possible ejection from the euro.
Cyprus moved perilously close to bankruptcy when its parliament threw out the proposed levy on Tuesday, with Cypriots enraged by plans to hit small holdings of ordinary savers as well as large accounts, many held by foreign investors.

In the absence of the bank levy, Nicosia turned to Russia, whose citizens have billions of euros at stake in Cyprus's outsized banking sector. But Finance Minister Michael Sarris returned from Moscow empty-handed. On Friday he said the bank levy was back "on the table".
Party officials told Reuters that discussions were centered on a levy on depositors holding over 100,000 euros, sparing smaller savers. One official said the tax could be limited to big savers at the island's biggest lender, Bank of Cyprus, at a 20 percent rate.

Lawmakers adopted a bill that would pave the way for the government to split its failing lenders into good and bad banks. The measure is likely to target Bank of Cyprus and No. 2 lender Cyprus Popular Bank, also known as Laiki, and would make it easier for the government to safeguard deposits that enjoy a state guarantee of up to 100,000 euros.
"With the process of consolidation, the depositors over 100,000 euros will wait for several years to see how much of their deposits they will collect," said Averof Neophytou, deputy leader of the ruling Democratic Rally party.

"At the same time, this political decision to support this harsh law safeguards 100 percent of the deposits of 361,000 depositors in Laiki Bank," he added, referring to depositors with up to 100,000 euros.

The pace of the unfolding drama has stunned Cypriots, who barely a month ago elected conservative President Nicos Anastasiades on a mandate to secure a bailout.
But lawmakers balked at hitting small savers with the bank levy, a rejection of the kind of strict austerity signed up to by Portugal, Ireland, Greece, Spain and Italy over the last three years of Europe's debt crisis.

Germany warned Cyprus it was "playing with fire". Moody's downgraded its credit rating on deposits in Cypriot banks to Caa3, just two rungs from the bottom on its 11-grade scale of junk debt.
The EU says the only way to find the 5.8 billion euros Cyprus needs to contribute to the bailout of its banks is from the depositors who put money in them.

The tottering banks hold 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros - enormous sums for an island of 1.1 million people which could never sustain such a big financial system on its own. Much of the banks' capital was wiped out by investments in Greece.
Many of the biggest depositors are foreigners, including rich Russians, and European politicians are loathe to spend taxpayers' money on a bailout if the depositors take no losses.

"EDGE OF AN ABYSS"
With banks in Cyprus closed until Tuesday, Cypriots have been besieging bank cash machines all week. Faced with an almost certain run on banks when they reopen, parliament also gave the government the power to impose capital controls.

"Our so-called friends and partners sold us out," said Marios Panayides, 65, a protester at the parliament. "They have completely abandoned us on the edge of an abyss."
Retailers, facing cash-on-delivery demands from suppliers, warned stocks were running low.
"At the moment, supplies will last another two or three days," said Adamos Hadijadamou, head of Cyprus's Association of Supermarkets. "We'll have a problem if this is not resolved by next week."
The Bank of Cyprus urged the government to go back and cut a deal with the EU under which larger deposits over 100,000 euros would be taxed. It was preferable, it said, to a collapse of the system and ejection from the euro which would wipe out assets.
"There must be no further delay," the bank said.

Taking a first step toward financial consolidation, Cyprus arranged on Friday for the takeover of big Greek units of its two biggest banks by a Greek competitor.
EU officials criticize Cyprus for initially insisting any deposit levy should hit even small savers. Cypriot leaders did not want to shift the whole burden to bigger depositors in the apparent hope of saving Cyprus's offshore banking industry.

German Chancellor Angela Merkel told lawmakers that while she wanted to keep Cyprus in the euro zone, it must first recognize it had no future as an offshore financial center, two parliamentarians told Reuters.

Her finance minister, Wolfgang Schaeuble, said that muted reactions to the crisis in financial markets showed the euro zone was able to contain the Cyprus problem.
The Dutch head of the euro zone finance ministers' group, Jeroen Dijsselbloem, said the group wanted to keep Cyprus in the currency union. But when asked, he did not rule out an exit.
"All kinds of scenarios are possible and the scenarios we're focusing on are to come to a joint solution in which Cyprus is saved but in which the banking sector continues in a smaller but healthier form."

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Iran will destroy Israeli cities if attacked: Khamenei

Iran's clerical supreme leader said on Thursday the Islamic Republic would destroy the Israeli cities of Tel Aviv and Haifa if it came under attack from the Jewish state.
"At times the officials of the Zionist regime (Israel) threaten to launch a military invasion but they themselves know that if they make the slightest mistake the Islamic Republic will raze Tel Aviv and Haifa to the ground," Ayatollah Ali Khamenei said in an address to mark the Iranian new year.
Israel has threatened military action against Iran unless it abandons nuclear activities which the West suspects are intended to develop nuclear weapons. Tehran denies this, saying it wants nuclear energy only for civilian purposes.

 

In his televised speech, Khamenei said Iran's struggles over the past year against international sanctions imposed over its disputed nuclear program resembled a battle and that its enemies had confessed to trying to "cripple the Iranian nation".

"What happened last year, we need to learn a lesson," he said, alluding to what he described as Iran's significant scientific and military advances. "This vibrant nation will never be brought to its knees."
Khamenei also called for Iran's "natural right" to enrich uranium for nuclear energy to be recognized by the world. Western powers have refused, saying Iran has hidden nuclear work from U.N. inspectors and stonewalled their investigations.

Talks between Iran and six world powers - the United States, China, Russia, Britain, France and Germany - are to resume early next month in a further attempt to strike a deal on Iranian nuclear aspirations.But Khamenei was cool to a U.S. suggestion of direct talks between the two countries, which severed diplomatic relations after Iran's 1979 Islamic Revolution.

"I am not optimistic about these talks. Why? Because our past experiences show that talks for the American officials do not mean for us to sit down and reach a logical solution ... What they mean by talks is that we sit down and talk until Iran accepts their viewpoint," he said.
"Iran only wants its enrichment right, which is its natural right, to be recognized by the world."

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Email:info@cfb.ae

For more information please visit our website:  www.cfb.aeHere are some useful links that you can follow:

Here is a CFB blog that gives useful daily trade advice... http://century-financial-brokers-uae.blogspot.ae/

You can also follow CFB on facebook (useful advice on posts regularly)

Here is another blog that provides regular news and information and is very useful to stay updated 
on the markets...  http://centuryfinancialbroker.wordpress.com/

U.S. Dec. budget deficit $260 million: Treasury

The U.S. government ran a budget deficit of $260 million in December, the Treasury Department reported Friday, bringing the total shortfall for the first quarter of fiscal 2013 to $292 billion.

 Receipts in December were $269.5 billion, while the government spent $269.7 billion in the month. Year to date, the deficit is 9% lower than in the first three months of the prior fiscal year. The U.S. government's fiscal year runs from October to September.

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Where next for the Australian dollar?

SYDNEY (Market Watch) — The Australian dollar has survived a drop in commodity prices and lower interest rates this year, but will the world’s fifth-most-traded currency head lower in the new year? 

The “aussie”— which accounts for around 7% of global foreign-exchange trade — presently trades well over the $1.05 mark, near where it started the year. 

Relatively high domestic interest rates, a triple-A credit rating and an outperforming economy have laid the foundations for the currency’s strength over the last few years, after it started 2009 at around 70 U.S. cents.

It stumbled mid-year to as low as 96 U.S. cents, when a drop in commodity prices raised questions about the future strength of Australian exports, and downward pressure on interest rates eroded some of its yield advantage against rivals. 

Since then, however, iron-ore prices are off their worst levels, thanks to signs that China’s economy is stabilizing, and while interest rates are still well above levels found in many other developed world economies. But analysts say these issues alone don’t fully explain the recent revival in the Australian currency’s fortunes. 

“The simplest answer is that some other factor matters more, and the likely candidate is the risk-on/risk-off dynamic,” HSBC currency strategists said in a recent research note.

“Even a cursory glance at the evidence suggests a strong and consistent relationship between the Australian dollar-U.S. dollar pair and the performance of the U.S. equity market, in turn a reliable proxy for the wider risk-on/risk-off phenomenon,” the strategists said. 

From 2009, the Australian dollar’s rate against the U.S. currency has shown a more than 75% correlation with moves in the S&P 500 according to HSBC’s research. 

Fed matters

Risk-on/risk-off trading in the last few years has in itself largely resulted from massive central-bank liquidity injections into financial markets, where the sheer weight of money has created its own trading force. Money has found a home in many assets, pushing prices up. 

One of the banks leading the way in quantitative easing has been the Federal Reserve, which has had something of a knock-on effect on the U.S. dollar’s performance against rivals such as the aussie.

After their initial push following the 2008 global financial crisis, the central banks again ramped up policy-support measures and liquidity in the latter part of this year, with the Fed recently pledging billions more a month to support the U.S. economy, giving fresh legs to the Australian dollar. 

The Australian dollar “is still being influenced by global factors,” said Alvin Pontoh, currency strategist at TD Securities, who has an end-2013 target of $1.03 for the aussie. 

Pontoh believes the Fed is likely to extend quantitative easing at least to the end of next year, and the European Central Bank will also likely cut interest rates further.

Gold drops on stalemate in U.S. budget talks

Precious-Gold dropped on Tuesday trading on renewed worries regarding the so-called U.S. fiscal cliff as officials did not reach a solution yet, thereby threatening both U.S. and global recovery.

The shiny metal slipped for a third straight session to trade around $1704.66 an ounce, where it found support at $1701.66, which represents the Simple Moving Average (SMA) 100 level on the daily charts, after it fell from a high of $1717.35.

The trading range for today is expected among the key support at $1690.00 and the key resistance now at $1730.00.

Still, the main director of market sentiment is the U.S. fiscal cliff; it threatens the world`s biggest economy of falling back into recession if $607 billion of tax hikes and spending cuts start in January.

Yesterday, House of Republicans suggested a $2.2 trillion deficit-cutting plan, yet White House Communications Director Dan Pfeiffer replied that it “does not meet the test of balance.”

With the sluggish progress seen in U.S. budget talks the tensions are heightening and weigh on shares and commodities.

Gold is now moving with the U.S dollar as they both face downside pressure of the little progress in the budget negotiations.

The dollar index plummeted today to record a low of 79.80 after opening today`s trading at 79.89.

On the other hand, the euro is resuming its upside direction to six-week high versus the greenback after Greece said yesterday it would spend 10 billion euros to buy-back bonds via a modified Dutch auction.

Euro area finance ministers expressed their confidence that Greece will handle a successful bond buyback on Dec. 7, lifitng up expectations the debt crisis is abating.

Later in the day, European Union finance ministers will meet in Brussels to continue their pursuit to ease the three-year-old debt crisis.

Crude oil for January`s delivery inched down to $88.68 per barrel compared with the day`s opening level of $88.90.

Among other precious metals, silver retreated to $33.28 from the day`s opening of $33.32, platinum ticked down to $1592.75 from $1594.25, and palladium inched up to $678.60 from $678.40.

Gold drops on stalemate in U.S. budget talks

Precious-Gold dropped on Tuesday trading on renewed worries regarding the so-called U.S. fiscal cliff as officials did not reach a solution yet, thereby threatening both U.S. and global recovery.

The shiny metal slipped for a third straight session to trade around $1704.66 an ounce, where it found support at $1701.66, which represents the Simple Moving Average (SMA) 100 level on the daily charts, after it fell from a high of $1717.35.

The trading range for today is expected among the key support at $1690.00 and the key resistance now at $1730.00.

Still, the main director of market sentiment is the U.S. fiscal cliff; it threatens the world`s biggest economy of falling back into recession if $607 billion of tax hikes and spending cuts start in January.

Yesterday, House of Republicans suggested a $2.2 trillion deficit-cutting plan, yet White House Communications Director Dan Pfeiffer replied that it “does not meet the test of balance.”

With the sluggish progress seen in U.S. budget talks the tensions are heightening and weigh on shares and commodities.

Gold is now moving with the U.S dollar as they both face downside pressure of the little progress in the budget negotiations.

The dollar index plummeted today to record a low of 79.80 after opening today`s trading at 79.89.

On the other hand, the euro is resuming its upside direction to six-week high versus the greenback after Greece said yesterday it would spend 10 billion euros to buy-back bonds via a modified Dutch auction.

Euro area finance ministers expressed their confidence that Greece will handle a successful bond buyback on Dec. 7, lifitng up expectations the debt crisis is abating.

Later in the day, European Union finance ministers will meet in Brussels to continue their pursuit to ease the three-year-old debt crisis.

Crude oil for January`s delivery inched down to $88.68 per barrel compared with the day`s opening level of $88.90.

Among other precious metals, silver retreated to $33.28 from the day`s opening of $33.32, platinum ticked down to $1592.75 from $1594.25, and palladium inched up to $678.60 from $678.40.