Market Update - 28 March 2013

• Europe continue to be on the drag as Italy failing to form a government, which will lead to fresh elections, and fear of contagion from Cyprus has caused markets to be on a bearish mode.

• Cyprus has deployed hundreds of security guards to help maintain order after the government announced capital controls that will limit daily cash withdrawals to €300 and a cap of €1,000 that can be taken out of the country by an individual. The measures will apply to all banks, not just the two largest covered in the restructure; banks are due to open for the first time in almost two weeks tomorrow. 5 board members of the Bank of Cyprus tried to resign, before having their resignations rejected - ICAP

• To make it more shaky in Europe, Moody’s declared that they doubted market conditions were benign enough to avoid contagion to other peripherals, “We think that that confidence may well be misplaced.”

• USDMYR didn’t show much change or reaction to the news in Europe and continue to trade in the 3.1000 handle. Range for the week, 3.0800-3.1200.

• There is a huge increase in risk premium for holding deposits anywhere in Europe has hugely increased, particularly in the periphery, and that will lead, at best, to an increase in borrowing costs and a squeeze on capital at the most troubled banks.

• All across Europe markets were down, the EURUSD was down 90 pips on the night to 1.2773, the lowest since November, while Eurostoxx fell 1.09%.

• In the US, things followed the sentiment, DOW is down just 0.23% and the S&P off 0.03% as several dovish Fed members talked down the chances of an early exit and despite pending home sales softening up for a second month.

• Meanwhile France and the UK both confirmed a Q4 contraction with final GDP printing -0.3% in both countries. Italian industrial orders grew less than expected but an upward revision to last month’s figures actually lifted the annual pace of decline to -3.3% from -15.3%. F