LONDON, March 19 European shares fell at the
open on Tuesday with trade expected to remain volatile as the
Cypriot bank levy continued to take centre stage with investors
wrestling over the longer-term impact of the bailout plan.
Cyprus's Stock Exchange suspended trade on Tuesday and
Wednesday while banks on the island remained shut as its
parliament looked set to reject a divisive tax on bank deposits
in a vote scheduled for Tuesday.
By 0805 GMT, the FTSEurofirst 300 fell 0.5 percent
to 1,194.37, having closed 0.3 percent lower in the previous
session after Cyprus's bailout plan sparked fears of bank runs
in the euro zone's most indebted countries.
The sell-off caused a sharp spike in European volatility
-- a crude gauge of investor fear -- although settled
down as investors took the opportunity to grab more shares in
big European multinationals on the dips in a market underpinned
by central bank support.
"The markets are currently still focusing on the fact that
central banks will always be there to save the day, the
relatively good economic data out of the U.S. and that there has
been no major sell-off after the Italian election, so investors
are still positioned for a risk-on environment," Andreas
Hoefert, chief economist at UBS, said.
However, Hoefert said that in the long run the developments
in Cyprus would be unsettling for the market because it
undermines the euro and the trust surrounding policy in Europe,
which at some point will see the market reposition itself.