St George Economics economy and finance update

General:

Risk appetites lifted slightly on Friday night after Cyprus' parliament approved the use of capital controls and closing insolvent banks.

That raised expectations Cyprus would be able to secure a bailout from the International Monetary Fund/European Union/European Central Bank.

Negotiations to that end are currently in progress and need to be concluded before tonight when the ECB has threatened to cut off emergency liquidity to the banking system.

Cyprus' parliament approved plans to wind down its second largest bank, Cyprus Popular Bank Pcl, with the losses to be imposed on its depositors.

Share Markets: 

The US stockmarket gained on hopes of a bailout deal for Cyprus. The Dow rose 0.6% and the S&P 500 and the Nasdaq both gained 0.7%.

Bonds:

US bonds edged lower (yields rose marginally at the long end) as hopes of a Cyprus bailout deal saw risk appetites lift, although ongoing concerns about the final outcome limited the move away from safe haven US government debt.

Foreign Exchange:

The Aussie dollar held its ground against the US dollar as investors awaited news on a Cyprus bailout.

The Euro gained versus the Aussie dollar on hopes of a bailout deal in Cyprus, despite softer data in Germany.

Sterling softened against the major currencies, including the Aussie dollar, after ratings agency Fitch put the UK on negative watch.

Commodities: 

The copper and oil price gained ground on Friday night on hopes a deal in Cyprus will restore risk appetites and boost demand for commodities.

Australia:

The conference board leading index rose 0.2% in January, following a 0.2% decline in December, suggesting that economic activity is improving.

Europe:

The German IFO business climate index falls to 106.7 in March, from 107.4 in February.

This was the first fall in the IFO index in five months, with most of the decline driven by expectations, although the current index slipped also.

United Kingdom: 

Ratings agency Fitch has put its UK AAA sovereign debt rating on negative watch, due to higher than expected government debt levels and downward revisions to its economic growth forecasts.

A decision on the rating is due by the end of April.

United States:

There was no significant data released in the US on Friday.

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