GLOBAL MARKETS-Shares steady despite Cyprus, euro flat after U.S. data

Tue Mar 19, 2013 10:56am EDT

* European shares flat; but Cyprus still a concern
    * Data latest sign of U.S. housing strength
    * German government bonds rise, periphery bonds dip


    By Ryan Vlastelica
    NEW YORK, March 19 (Reuters) - Global stock markets were
mostly steady on Tuesday, rebounding off earlier weakness as
investors used the previous two-day decline as an opportunity to
pick up beaten down shares.
    European stocks, along with the euro and oil, had been
pressured on concerns over the risk of failure for a bailout
deal aimed at saving Cyprus from default and its banks from
collapse. While those concerns limited gains in Europe, a strong
read on the U.S. housing market was cause for optimism.
    "Everyone is watching for the possibility of a default, but
the housing number was very strong and a reason why I continue
to be very bullish," said Wayne Kaufman, chief market analyst at
John Thomas Financial in New York.
    A government spokesman said Cyprus' parliament was likely to
reject plans agreed by euro zone officials over the weekend to
part-fund a 10 billion euro rescue of the island by seizing
between 6.75 percent and 9.9 percent of deposits in Cypriot
banks. 
    Euro zone ministers have urged Cyprus to let smaller savers
escape the levy, but if parliament cannot agree, it would put
the bailout in jeopardy and raise the risk of default.
 
    The euro was flat at $1.2954, as were European shares
. London's FTSE 100 slipped 0.07 percent and 
Paris's CAC-40 fell 0.6 percent while Frankfurt's DAX
 fell 0.3 percent. MSCI's measure of global stock
markets was off 0.09 percent.
    In the United States, the Dow Jones industrial average
 was up 16.43 points, or 0.11 percent, at 14,468.49. The
Standard & Poor's 500 Index was down 0.79 points, or 0.05
percent, at 1,551.31. The Nasdaq Composite Index was
down 2.99 points, or 0.09 percent, at 3,234.60. 
    Equities were supported by data showing that groundbreaking
for new U.S. homes climbed in February, a sign the nation's
housing market recovery was gathering steam. 
    According to the latest Reuters poll of analysts, the S&P
500 is expected soon to hit a record high, though the blistering
rise in equities so far in 2013 is unlikely to last.
 
 

    BUND BOUNCE
    The plan to seize deposits in Cyprus shredded confidence in
the 100,000 euro ($129,600) guarantee on savings offered across
the European Union and raised fears of bank runs in other
debt-strained countries, putting safe-haven German government
bonds again in demand.
    The Bund future built gains steadily through the
morning before solid ZEW data tempered some of the demand to
leave it up 0.2 percent at 144.25. The benchmark 10-year U.S.
Treasury note was up 11/32, the yield at 1.9165
percent. 
    "We are just waiting for another headline out of Cyprus,"
one trader said, adding that buying Bunds "is the only trade to
have on."
    
    ECB BACKSTOP
    While Cyprus's problems are threatening to disrupt the calm
brought to the bloc over the last eight months by the European
Central Bank's promise to protect troubled countries, that
guarantee has also kept the market reaction muted.
    With stock markets in many parts of the world at or near
long-term highs, analysts are taking the drops of the past few
sessions in stride.
    With the exception of German government bonds, the knee-jerk
flight to safety seen on Monday was showing signs of subsiding.
    The cost of insuring the debt of southern euro zone
countries against default via credit default swaps was virtually
unchanged as midday approached, and the dollar was flat against
a basket of major currencies after Monday's rise.
    In Asian trading, Japanese stocks jumped 2 percent and the
recovery in general risk sentiment supported Asian credit
markets, narrowing the spread on the iTraxx Asia ex-Japan
investment-grade index by five basis points. 
    Oil remained sensitive to the jitters, however,
falling 0.6 percent to $108.89. If the situation in the euro
zone deteriorates again, analysts warn it could affect the
health of the global economy.
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