Cyprus conceded on Saturday bailout goes down to wire

. .. . . By K Tagaris and M Kambas - Cyprus conceded on Saturday to a one-off levy on deposits over 100,000 euros in a dramatic U-turn as it raced to satisfy European partners and seal an 11th-hour bailout deal to avert financial collapse. The island's finance minister, Michael Sarris, reported "significant progress" in talks with international lenders, with the clock running down to end-Monday deadline for Cyprus to clinch a bailout deal with the EU or lose emergency funding for its stricken banks and risk tumbling out of the euro zone. His counterparts in Europe's 17-nation currency union scheduled talks in Brussels for Sunday evening to see if the numbers add up, and the EU's Economic Affairs Commissioner Olli Rehn said progress was being made towards a solution. As Cypriot party leaders met, a senior Cypriot official told Reuters that Nicosia had agreed with EU/IMF lenders on a 20 percent levy over and above 100,000 euros at No. 1 lender Bank of Cyprus, and four percent on deposits over the same level at others. Troika officials could not immediately be reached for comment. Cypriot President Nicos Anastasiades tweeted: "We are undertaking great efforts. I hope we have a solution soon." The conservative leader, barely a month in the job and wrestling with Cyprus's worst crisis since a 1974 invasion by Turkish forces split the island in two, was due to lead a delegation to Brussels, also on Sunday, to meet heads of the EU, the European Central Bank and International Monetary Fund, in a sign a deal might be near. "Hopefully by tomorrow in Brussels we will have the agreement of our partners," Averof Neophytou, deputy leader of the ruling Democratic Rally party, told reporters. Government officials held talks through the day at the finance ministry with Cyprus's 'troika' of lenders - the EU, ECB and IMF. Angry demonstrators outside chanted "resign, resign!" Its outsized banking sector crippled by exposure to crisis-hit Greece, Cyprus needs to raise 5.8 billion euros in exchange for a 10 billion euro EU lifeline to keep the country's economy afloat. But in a stunning vote on Tuesday, Cyprus's 56-seat parliament rejected a levy on depositors, big and small, as "bank robbery", and Sarris spent three fruitless days in Moscow trying to win help from Russia, whose citizens have billions of euros at stake in Cypriot banks. Rebuffed by the Kremlin, Sarris said on Saturday talks with the troika were centered on a possibly levy of around 25 percent on savings over and above 100,000 euros at failing Bank of Cyprus. In a sign of how fluid the situation remains, however, a senior ruling party lawmaker said other options were on the table, including a "voluntary haircut" in exchange for equity that would not require parliamentary approval. The EU's Rehn said the bloc recognized the progress made by the Cypriot government, and warned of tough times ahead. "Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available," he said in a statement. "Today, there are only hard choices left." It was far from certain that a majority of lawmakers would back a revised levy, or whether the government might bypass the assembly. Ordinary Cypriots were outraged by the original proposal, and have been besieging cash machines ever since bank doors were closed last weekend on the orders of the government to avert a massive flight of capital. RESISTANCE Racing to placate its European partners, Cypriot lawmakers voted in late-night session on Friday to nationalize state pensions and split failing lenders into good and bad banks - a measure likely to be applied to No.2 lender Cyprus Popular Bank, also known as Laiki. They also gave the government powers to impose capital controls, anticipating a run on banks when they reopen on Tuesday. A plan to nationalize semi-state pension funds has met with resistance, particularly from Germany which made clear that tapping pensions could be even more painful for ordinary Cypriots than a deposit levy. The senior official who told Reuters of the levy agreement said the pension funds would not be part of the package to seal the bailout. The bank restructuring has also angered Cypriots. On Saturday, around 1,500 bank workers marched on the presidency, holding banners that read, "No to the bankruptcy of Cyprus" and "Hands of workers' welfare funds". OFFSHORE HAVEN The pace of the unfolding drama has stunned Cypriots, who in February elected Anastasiades on a mandate to secure a bailout and save banks whose capital was wiped out by investments in Greece, the epicenter of the euro zone debt crisis. Then news of the levy on bank deposits broke, an unprecedented step in Europe's handling of a debt crisis that has spread from Greece, to Ireland, Portugal, Spain and Italy. Cypriots leaders had initially tried to spread the pain between big holdings and smaller depositors, fearing the damage it would inflict on the country as an offshore financial haven for wealthy foreigners, many of them Russians and Britons. The tottering banks hold 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros - enormous sums for an island of 1.1 million people which could never sustain such a big financial system on its own. But panicked by the visceral reaction of ordinary Cypriots, support from lawmakers fell away and they rejected the levy as "bank robbery". Asked about the new plan for a possible 25 percent levy, Finnish Prime Minister Jyrki Katainen, whose country is allied with Germany in taking a hard line on Europe's debt-laden southern flank, replied in English: "If it was like this, I think it might be quite suitable because it means that the highest deposits will be taxed." Cyprus fears this will drive wealthy depositors away, but the likes of Germany and France say Cyprus's offshore-haven business model was never sustainable. "Cypriot banks have for years been taking the kinds of risks that are not allowed in France," Bank of France governor Christian Noyer told the French newspaper Le Journal Du Dimanche.

$BAC #BAC Bull Market Or Bear Market in 2013 & 2014 ?

In two months, this bull run will turn four years old, having more than doubled since it began on March 9, 2009, with the S&P 500 index (^GSPC) lifting off from a 13-year low of 676. The average duration of all prior bull markets since 1929 is 3.8 years, and the median just 3.6 years. The major indexes have also risen more than the average, albeit from the wreckage of a particularly devastating decline. Aside from this simple tale of the tape, some seasoned observers are spying wrinkles on the bull. Technical market analyst Mary Ann Bartels of Bank of America Merrill Lynch views fewer and larger stocks leading the tape higher, with unimpressive momentum, as evidence of an aging advance that could culminate sometime this year. Investment firm Leuthold Group also backed off its previous optimistic stock views because of the hazards of mature uptrends. More fundamentally, much of the benefit from soaring corporate profits and sharply lower interest rates has been realized, this fuel largely spent in propelling stocks to their current levels. Corporate profit margins are near 50-year highs and borrowing rates around half-century lows. There are plausible arguments for why both can remain benignly steady but neither is likely to provide incremental oomph for share prices. Yet a few factors mitigate the effects of the years on this stock market phase. For one, all prior bull markets at least matched their former all-time high, which now would mean gaining at least another 10%. Then there is the fact that this bull is uncommonly battle-tested. It has been shadowed by the constant fear that the global economic recovery was faltering, and rattled by the periodic loss of faith in sovereign finances. It has weathered a double-digit percentage decline in each of its three full calendar years, only to prove resilient (with the copious help of central banks’ free money acting as “liquid courage,” naturally). Because of this pattern, few of the excesses that typically build up and eventually doom a rising market are apparent. The public has not gotten excited about the market and therefore hasn’t driven much speculative froth. Valuations – while not cheap compared to profits – are within roughly the normal band of historical readings, and would not impede a run to new highs should recent signs of economic momentum persist. Stocks, too, are being flattered by the company they’re keeping. The U.S. economy, though it’s been growing for more than three years, is still operating well below its potential, with lots of slack productive capacity and idle workers. These are early-stage-recovery traits, and as such are being treated with intense post-recession medicine by a Fed that still views this as a fragile, halting expansion. While the release of minutes from the December Fed meeting showed some policy committee members preferring to end the bond-buying program later this year, the Fed will almost certainly continue to err on the side of easy money and keep rates near zero. This same Fed suppression of risk-free rates is dragging down yields on all other assets, from mortgage debt to corporate bonds. Set against these alternatives, stocks’ valuations are not anomalous at all, even if, in the abstract, shares are not demonstrably cheap. There are at least two themes to watch in 2013 that should determine whether this bull can keep marching higher: The potential receding of macro/policy influences and the appetite for corporate deal-making and other risk-seeking behavior. There’s a good chance we are now witnessing the peak of partisan polarization and the fiscal frictions driving domestic economic policy anxieties. Before laughing too hard, consider that, a year ago, the dominant sentiment was that central bankers were at serious risk of losing control of the capital markets, the European Central Bank was not up to the task of holding the euro zone together and a Lehman-like incident was a real risk. In fact, we saw central banks in 2012 resolutely deploy irresistible monetary firepower to pacify markets and suppress volatility, to the point that today it is broadly taken for granted that they have duly muted the “tail risk” of terrible financial disruptions. Now that the full “fiscal cliff” has been averted, investors broadly assume the coming debt-ceiling/spending cut debate will prove just as maddening and market-rattling, or even worse. Yet the latest deal took tax rates off the battlefield. And President Obama can use his State of the Union address to invite a broad, legacy-defining fiscal arrangement, becoming flexible to Republican priorities now that his campaign promise on taxes is met. This should put both monetary and fiscal policy tentatively in the “settled” column, after nearly half a decade in which systemic, macroeconomic and policy threats caused markets to dart and shudder. In a best-case scenario, this would return markets to the boring old elements of gauging the economic cycle and sorting the corporate winners from the losers. The most bullish handicappers, such as Jim Paulsen of Wells Capital Management, assert that such a policy-risk ebb tide should allow confidence to build among investors and CEOs, extending their time horizons, lifting asset valuations and emboldening hiring and capital spending. Could happen. There’s a chance that, even if easy money and a self-sustaining economic recovery can’t in themselves inflate stock prices, a spreading sense that the Fed has successfully stretched out the slow-and-steady economic trajectory could be enough to loosen investor and company purse strings. Either way, the caging of macro/policy monsters could make the market safe again for picking and panning individual stocks and asset classes. The pendulum is overdue to swing back in favor of security selectors, long-short managers and hunters of idiosyncratically mispriced assets. That could mean betting heavily on the auto rebound, loading up on cheap “old tech” stocks or playing possible downside in expensive slow-growth staples stocks. The second key is deal activity. Mergers and acquisitions volume as a proportion of total stock-market value in 2012 was 20% below the 10-year average. It almost has to accelerate if this market is to resist gravity much longer. This is not just because buyouts enrich the shareholders of the acquired companies. It’s because this is the point in the corporate-profit and bull-market cycle when “financial engineering” takes over as a driving theme. By YahooFinance.com

What You Need To Know Before The Opening Bell

Here's what you need to know.




•Asian indices were mostly down in overnight trading with the Shanghai Composite up 0.18%. Major European indices are in the red and U.S. futures indicate a negative open.

•A European Central Bank source is reported to have said that the existing European rescue fund is not big enough to take on an Italian bailout. Italian stocks are off over 2% and yields on two-year government bonds have widened. Don't miss: The sad story of how Italy got to be such a wreck >

•It is being reported that European leaders are prepared to accept a Greek default on some of its bonds as part of a new bailout plan. The move is expected to be discussed at a Brussels meeting of Eurozone finance ministers today. Meanwhile two-year Greek bond yields have surged to over 31%. Here are the 15 countries that are buried under the most debt >

•The consumer price index in China surged to 6.4% in June from the previous year. Talks of a Chinese economic slowdown have intensified, as trade surplus widened with import growth falling to 19.3% in June from 28.4% the previous month, and exports falling to 17.9% from 19.4% in May. Check out the 10 countries that will dominate world trade in 2050 >

•Aluminium faint Alcoa will kick off the second quarter earnings season today. Expectations are for revenues of $6.33 billion and earnings-per-share of $0.34.

•Italian bank UniCredit SpA has expressed interest in Libya's 7.5% stake in the bank. The Central Bank of Libya holds about 5% of the bank, while the Libyan Investment Authority has 2.6%. UniCredit saw major sell-off last week on fears of contagion from the Greek debt crisis.

•French drugmaker Sanofi is selling Dermik dermatology to Valeant Pharmaceuticals for $425 million in cash. The move comes as Sanofi hopes to focus on its core business.

•U.S. listed Arch Chemicals is being acquired by Swiss drugmaker Lonza for $1.2 billion. Lonza will pay $47.20 per share for Arch Chemicals, and the deal is expected to hedge the company against the impact of the strong Swiss franc and give it a larger market share of the 'microbial control market'.

•Shares of British Sky Broadcasting fell further today over concerns that News Corp. will be unable to take full control of the broadcaster, following the hacking scandal that has plagued Rupert Murdoch.

•The political stalemate on debt ceiling continued as House speaker John Boehner budget cuts had to exceed the amount by which the debt ceiling is raised and that the deal had to exclude tax hikes. Boehner is said to have abandoned talks of tax increase after he was widely criticized by his party. Click here to see 14 depressing facts about the US deficit >

•BONUS - Kate Hudson gave birth to a baby boy in Los Angeles on Sunday.

Stock News You Need To Know Before The Opening Bell

Asian markets were higher in overnight trading, with the Shanghai Composite up 1.59%. Major European industries are also higher, and U.S. futures suggest a positive open.




Factory orders data for November is released at 10:00 AM ET. Expectations are for orders to remain flat.



Floods in Australia's Queensland region look likely to expand with more rain coming. Right now, nearly three quarters of the region's coal exports are being delayed or stopped.



German unemployment surprisingly increased in December, though the unemployment rate remained at 7.5%. The slowdown is being blamed on harsh winter conditions in the country. These are the 6 macro themes that matter in 2011.



The UK's manufacturing sector continued to perform well in December, with the country's PMI rising to 58.3. PMI is now at a 16-year high.



The five biggest lendiers, including Bank of America, JPMorgan, and Citigroup are said to be close to a settlement of the various states foreclosure lawsuits. It should be excellent news for the red-hot financials.



Spain is preparing to launch a new stress test of the country's savings banks in an effort to drive them to raise money on the open market. The government is trying to avoid unnecessary reliance on its banking sector support fund.



The U.S. office occupation rate increased by 2.5% in Q4 2010, the first increase in around 3 years. The vacancy rate on office space nationwide remains high, at 17.6%.

Shell is continuing to ponder a deal for BP, in which the two oil giants would merge. Shell has no interest in bidding, however, unless a rival steps in first.



Borders shares sank over 8% in after hours trading yesterday as a result of two executives leaving the company. Recently, Borders failed to make payment to some of its publishing partners.



The Pentagon will announce plans to cut its budget by $100 billion that will include reductions in spending on certain weapons programs. U.S. Defense Secretary Robert Gates could announce the moves on Thursday. Check out Goldman Sachs' Jan Hatzius answers to 10 pressing questions on the U.S. economy.



A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Completely Revised and Updated)