* Euro edges away from 4-month low vs dollar
* European shares rebound as Cyprus tensions ease
* Wall Street expected to open higher
* Assets generally lacklustre ahead of Easter weekend
By Marc Jones
LONDON, March 28 European shares rebounded and
the euro edged off a four-month low on Thursday after banks in
Cyprus reopened to relative calm following the island's hard-won
There was no sign of the mass panic that Cypriots and
investors had feared might be triggered when banks reopened
after a forced closure of almost two weeks, albeit with tight
controls to prevent depositors from cleaning out their
Cyprus's 10 billion euro rescue deal with its European
partners at the weekend is the first euro zone bailout to impose
losses on bank savers.
Data from the European Central Bank showed that some had
already begun to bleed their accounts in February when the
possibility of a grab on deposits first emerged.
But the calm as bank staff returned to work helped settle
early market jitters, amplified by an unexpected rise in German
unemployment, political turmoil in Italy and end-of-quarter
caution as traders worked to get their accounts in order.
The euro, which has dropped around 2 percent over the
last couple of weeks, climbed back above $1.28 by 1230 GMT,
easing away from a four-month low against the dollar and
a one-month low against the yen
European stock markets also shrugged off early nerves.
With benchmark indexes in London, Frankfurt and Paris all
higher, the FTSEurofirst 300 climbed 0.7 percent and
looked on course to narrowly avoid a second successive week of
The rise in German unemployment was too small to spark
worries that its economy will falter and was offset by stronger
retail sales. There was also a surprise rebound in Italian
German government bonds, an asset that investors
turn to in times of increased tension and one which has jumped
during the turmoil in Cyprus, reversed early gains as the mood
improved to stand three ticks lower on the day at 145.48.
But festering worries that Cyprus's grab on deposits could
be repeated elsewhere kept bonds issued by Italy and Spain - the
two countries viewed as most vulnerable to contagion - in
"Anything is up for grabs now because the whole rescue
template has changed," said Philip Tyson, strategist at ICAP in
As Europe headed towards a four-day Easter weekend, traders
looked back on another quarter of gains for riskier assets such
as equities and higher-yielding bonds from the euro zone's
Despite the recent Cyprus-related blip, European shares are
heading for a record tenth straight month of gains and a
year-to-date rise of almost five percent.
In Asian trading, Japan's Nikkei and other indexes
in the region clocked up another positive
quarter while closing lower in their final session before
Stock futures pointed to another higher open on Wall
Street. The Dow Jones industrial and S&P 500
indexes are looking to build on a month of record, or near
record highs, but analysts think the run may be due a pause as
political turbulence returns to Europe and growth slows.
A 42 percent jump in the cost of using Credit Default Swaps
to insure against defaults by European banks over
the last two weeks suggests there has been a shift among
investors in Europe.
"I think the worse-than-expected sequestration in the U.S.,
the Italian elections and this surprise in Cyprus are the kind
of combination that was required to slow things down a bit,"
said Dan Morris, global market strategist at JP Morgan.
"Some of the fundamentals are still there in terms of
liquidity both from central banks and from fund flows but we
have to keep in mind is that earnings growth hasn't been
fantastic... You do need GDP to pick up and that is probably not
going to be the case until the end of the year."
Commodities staged one of their broadest rallies of the year
on Wednesday with oil, metals and agricultural futures all
rising but they were mixed again as trading began to pick up.
Safe-haven favourite gold was managing to hold above
$1,600 an ounce, while oil was slightly up on the day as
it held near $110 a barrel as U.S. demand growth hopes helped
offset the worries surrounding Europe.
Those jitters and lacklustre Chinese buying pegged back
copper to $7594.25 a tonne, however, as metal traders
wondered whether the seasonally strongest second quarter will
bring the expected uplift in demand.
Optimism many economists had of a recovery in the euro zone
at the start of the year has proven unfounded but has also been
largely offset by signs of improving U.S. growth.
"We are in the peak seasonal demand time of the year - March
and April - fundamentally this is about as good as we're going
to get," said Credit Suisse analyst Ivan Szpakowski.
"It's not a recipe for a great rally, but it's modestly
positive ... Still as we progress through the remainder of the
year, we think that activity and demand is going to slow,"