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The Canadian Press - ONLINE EDITION

Asian stocks, euro fall before Cyprus vote on bailout plan requiring tax on bank deposits

By: Pamela Sampson, The Associated Press

Posted: 03/17/2013 10:08 PM | Comments: 0

BANGKOK - Asian stock markets and the euro fell Monday as a plan to fund a bailout for Cyprus by taxing its bank deposits raised worries it could spark an exodus of capital from fragile European economies.

The tax is part of a rescue plan for cash-strapped Cyprus that was reached Saturday after talks among officials from countries that use the euro, the International Monetary Fund and the European Central Bank.

Japan's Nikkei 225 index tumbled 2.1 per cent to 12,297.07. Hong Kong's Hang Seng dropped 2.3 per cent to 22,028.95. South Korea's Kospi shed 0.5 per cent to 1,976.74. Australia's S&P/ASX 200 fell 1.4 per cent to 5,048.90. Benchmarks in Singapore, Taiwan, mainland China and the Philippines also fell.

The Cypriot bailout follows those for Greece, Portugal, Ireland and Spanish banks, and it is the first one that dips into people's savings to finance a bailout. Analysts worry the move could roil international markets and jeopardize Europe's fragile economies.

"The market is worried that it may send the wrong message on the safety of bank deposits in other EU nations, just when light appeared to be emerging at the end of the long tunnel for the peripheral nations," analysts at DBS Bank Ltd. in Singapore said in a market commentary.

In a nationally televised speech Sunday, Cypriot President Nicos Anastasiades urged lawmakers to approve the tax, saying it is essential to save the country from bankruptcy. He also proposed that small depositors be exempt from paying the tax. Lawmakers are due to vote on the plan later Monday. If Parliament rejects the tax, that would put the entire rescue package in jeopardy.

In exchange for 10 billion euros ($13 billion) in rescue money, creditors would impose a one-time tax of 6.75 per cent on all bank deposits under 100,000 euros ($131,000) and 9.9 per cent over that amount.

U.S. stocks fell Friday, ending a 10-day winning streak for the Dow Jones industrial average, its longest in nearly 17 years. The Dow dropped 0.2 per cent to 14,514.11. The Standard & Poor's 500 index fell 0.2 per cent, to 1,560.70. The Nasdaq composite index dropped 0.3 per cent to 3,249.07.

Benchmark oil for April delivery was down $1.19 to $92.26 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 42 cents to finish at $93.45 per barrel on the Nymex on Friday.

In currencies, the euro fell to $1.2898 from $1.3083 late Friday in New York. The dollar fell to 94.62 yen from 95.60 yen.

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Follow Pamela Sampson on Twitter at http://twitter.com/pamelasampson

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