Within a point of the record high — and then it fell. The S&P 500 rose as high as 1,564.91 on Monday, just below its 2007 high of 1,565.15. Jitters over Cyprus and bank stocks then pushed the index lower. It closed down 0.33 per cent at 1,551.69 (Reuters).
Cyprus marks a tough new approach for making senior bank creditors and depositors take losses, the eurozone signalled — before walking it back. “If we want to have a healthy, sound financial sector, the only way is to say: ‘Look, where you take the risks, you must deal with them, and if you can’t deal with them you shouldn’t have taken them on and the consequence might be that it is end of story’,” Jeroen Dijsselbloem, President of the Eurogroup of finance ministers, said hours after brokering the deal for Cyprus (Financial Times, Reuters). Read more
The following is a guest post from Chris Cook, a senior research fellow at the Institute for Security and Resilience Studies at University College London. His work is focused on a new generation of networked markets – which will, in Chris’s view, necessarily be dis-intermediated, open, decentralised and, therefore, resilient.
The second attempt to resolve the unsustainable debt burden of Cyprus’s over-leveraged banks spreads the pain differently to the disastrous initial attempt, but looks likely to leave Cyprus as an economic wasteland for generations. Frances Coppola outlined brilliantly yesterday the sort of financial disaster zone which Cypriots can expect. Read more
Tonight’s extra dollop of mind-bleach, fresh from the Eurogroup. Read more
Paul Krugman has penned a rather wonderful explainer on the economics of Google Reader, and why it makes economic sense for Google to shut down a much-loved service like Reader even if people say they are prepared to pay for it.
Krugman actually picks up where Ryan Avent left off, but the following paragraph does a good job of nailing the problem:
Basically, if the monopolist tries to charge a price corresponding to the value intense users place on the good, it won’t attract enough low-intensity users to cover its fixed costs; if it charges a low price to bring in the low-intensity user, it fails to capture enough of the surplus of high-intensity users, and again can’t cover its fixed costs.
It’s streaming from the LSE and is ostensibly about what economists and policymakers should take from the financial crisis. However, if we were cynical folk we’d suggest this makes a nice opportunity for Bernanke and King to get together, have some wine and go all Norman-Strong. Our eye’s on the ground tell us such luminaries as Carney and Yellen are also in attendance.
Anyway, enjoy, we know all the LSE alums here who made us post this will… Read more
…and it’s really about time it cost you your job.**
The Eurogroup head was in triumphalist form on Monday, claiming direct credit for having sent Cyprus into a parallel eurozone (capital controls, economy obliterated). Clock the direct quotes in this interview with the FT’s Peter Spiegel and Reuters’ Luke Baker: Read more
“If they don’t [impose them], it will be hell,” one government official said. “Everyone will be running to the banks to pull their money out. There’s a panic.”
That’s from the FT over the weekend. The “them” in question are capital controls which the bill passed by Cyprus on Friday gives politicians sweeping powers to impose (for the first time in euro-history). From the FT again: Read more
Live markets commentary from FT.com
EU ministers approve Cyprus bailout deal || Bankers’ pay premium narrowing England and Wales house prices gain || Plan to crack down on banks’ capital regulation arbitrage || Markets expect Chinese easing cycle to end || US Congress reviews tax break for corporate interest payments || Questions remain over death of Berezovsky || Dell evaluating alternative offers || Xi to focus on trade in Africa || Sinopec and parent China Petrochemical reach $3bn deal Read more
The deal of sorts that was struck to rescue Cyprus wasn’t without plenty of drama (the WSJ and Reuters say Cypriot president Nicos Anastasiades threatened to resign at one point). Cyprus’s leaders seemed keen to give Russians a good deal to the bitter end — as the FT notes, Bank of Cyprus, which is “particularly heavily laden with Russian deposits”, was the key sticking point:
The meetings, which broke down repeatedly, focused on Cypriot insistence that Bank of Cyprus survive the restructuring.
We recommend you go straight to Joseph’s take and the Eurogroup statement if you haven’t already been there but, if you have, here’s some commentary from our inboxes:
From UBS’s Reinhard Cluse:
Looking beyond today’s deal, we would raise the following issues:
Elsewhere on Monday (in a Cyprus free zone),
– Markets in almost nothing. Read more
Monday morning’s Eurogroup statement on Cyprus. You’ll want the details in the Annex.
Eurogroup approves Cyprus rescue deal || Laiki to be wound down, small deposits protected || Asian markets rise on Cyprus news || Investment bankers’ pay premium falls || UK house prices gain in March || US corporate interest reviews could have big effect on financing || Signs Chinese rate cut cycle to end || Dell board evaluating Icahn, Blackrock offers || Russians courted by European banks Read more
Ollie Rehn is speaking at Eurogroup press conference at pixel time; click the screenshot below of Djisselbloem to get to the live video feed: