The indexes, along with the broader European markets, had opened in positive territory, but was sent lower in the afternoon. Jeroen Dijsselbloem, the chairman of the Eurogroup of euro-zone finance ministers, said according to Reuters that the rescue program for Cyprus reached early Monday morning served as a template for addressing future banking problems in the euro zone.
"If the bank can't do it, then we'll talk to shareholders and the bondholders, we'll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders," he said, according to the report. See: Cyprus deal will dent euro, eventually--Citi's Englander
As part of the 10 billion euros ($13 billion) bailout deal, Cyprus agreed to restructure the two largest Cypriot banks, with depositors with more than EUR100,000, the cutoff for uninsured deposits, to face losses.
"There was a sigh of relief this morning following the Cyprus deal, but now there has been a lot of criticism leveled at this deal. It highlights many of the old flaws in the euro zone and it doesn't bode well for future resolutions," said Peter Dixon, strategist at Commerzbank in London.
"They had to tap into deposits, which is not a good thing," he added.
But even as investors were spooked by the prospect of bail-in solutions spreading to other ailing banking sectors, European equity markets still had the scope to move a little higher, Dixon said.
"If we got investors or corporations sitting on big piles of cash in the peripheral countries and they have seen what happened in Cyprus, the sensitive strategy would be to not hold cash and move them somewhere else like the equity markets," he said. "Other asset classes look awful and you don't get anything on fixed income."
The Cyprus Stock Exchange was closed for trading all of last week, but said it would reopen Tuesday. Monday is a public holiday in Cyprus. See: C
