Dow May Slide Ahead of Cyprus Savings Tax Vote

LONDON -- Stock index futures at 7 a.m. EDT indicate that the Dow Jones Industrial Average (DJINDICES: ^DJI  ) may open 0.61% lower this morning, while the S&P 500 (SNPINDEX: ^GSPC  ) may open down 0.87%.

The big story this morning involves EU member state Cyprus, where the government is planning to impose a one-off tax on all bank deposits in order to partially fund the country's $13 billion bailout. The original plan called for a tax of 6.75% on deposits below 100,000 euros and 9.9% on deposits above 100,000 euros, but these proportions look likely to be renegotiated ahead of a parliamentary vote expected to take place later today.

Cyprus' banking sector is unusually large for such a small country, thanks to its status as a tax haven, and it's thought that at least one of Cyprus' biggest banks would have collapsed without a bailout deal, leaving the country's deposit guarantee scheme unable to meet its obligations. Since EU member states, led by Germany, refused to accept a partial default on Cypriot debt, the Cypriot government was left with no alternative but to introduce this unprecedented tax on savers' deposits. The move has raised fears that a similar solution could be implemented in Spain or Italy and may undermine investors' confidence in the euro.

Today's domestic economic calendar starts with March's homebuilders' index at 10 a.m. EDT. Consensus forecasts suggest a reading of 47, up slightly from 46 in February. Companies including Ameresco, KiOR, and Cumulus Media are expected to report earnings before the opening bell this morning, but there is little doubt that most investors' attention will be focused on events in Cyprus.

Stocks that may be actively traded today include Transocean (NYSE: RIG  ) , which was 2.1% lower in premarket trading after it announced its opposition to the dividend and director nominees proposed by activist investor Carl Icahn. Icahn has proposed a $4 per-share dividend, nominated three candidates for election to Transocean's board, and submitted a proposal to modify the company's staggered board structure. In a statement issued late on Sunday evening, Transocean said Icahn's dividend proposal "is in direct conflict with Transocean's disciplined capital allocation strategy" and that it would "adversely affect the company's ability to operate and compete effectively."

Banking stocks were also lower in premarket trading, with Citigroup down 2.4% and Bank of America down 2%.

European markets
European markets dropped this morning in response to news of the Cyprus bailout deal, although losses were fairly modest and mostly restricted to banking stocks.

At 7:15 a.m. EDT, the DAX was down 1.05%, the CAC 40 was down 1.43%, the FTSE MIB was down 2.15%, and the IBEX 35 was down 2.12%. In London, the FTSE 100 (FTSEINDICES: ^FTSE  ) was down 0.83%, with Barclays and Royal Bank of Scotland Group both down by 4.5%. One company that did beat the trend was chain retailer Marks & Spencer Group, which rose 7.7% this morning after a weekend report in the Sunday Times newspaper suggested that the Qatar Investment Authority may be assembling a takeover bid for the company that would value it at 8 billion pounds.

If you're looking for shares that can outperform the wider market, you need to look beyond the news headlines. This free Motley Fool report, "The Top Growth Share For 2013," highlights a share that gained 38% in 2012, during which time the wider market rose just 6%. The company is a household name, and its earnings per share have risen by 44% since 2009 -- so click here now to download your free copy of this report while it is still available.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2317136, ~/Articles/ArticleHandler.aspx, 8/28/2014 7:34:22 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement