Stocks, euro slide on Cyprus bailout terms

EUROPE'S main stock markets lost ground and the euro fell under $1.30 on Monday on news that Cyprus might tax bank deposits as part of a controversial international bailout.

Asian equities fell heavily as the mooted plan by Cyprus to tax bank deposits raised fresh concerns the eurozone debt crisis could flare up again.

But after being down more than a percentage point in early trade, European exchanges gradually clawed their way back during the afternoon as the initial shock passed, with London's FTSE 100 index of leading companies closing down 0.49 per cent at 6457.92 points.

In Frankfurt, the DAX 30 dropped 0.40 per cent to 8010.7 points, while in Paris the CAC 40 shed 0.48 per cent to 3825.47 points.

Elsewhere, Madrid's IBEX 35 shares index fell 1.29 per cent and Milan's FTSE MIB sank 0.85 per cent in value.

In midday trade in the US, the Dow Jones Industrial Average gave up 0.08 per cent to 14,501.94 points, the broad-based S&P 500, which last week appeared poised to break its all time record, declined 0.30 per cent to 1556.04 points and tech-rich Nasdaq Composite Index lost 0.20 per cent to 3242.63.

In foreign exchange activity, the European single currency plunged at one point to $US1.2882 in Asian deals to the lowest point since December 10, 2012.

"Euro weakness has unsurprisingly been the central story today, with the single currency slipping the most in 14 months," said Nick Dale-Lace at CMC Markets brokerage.

The euro later stood at $US1.2977, down from $US1.3075 on Saturday in New York.

Gold prices meanwhile rose to $1603.75 an ounce on the London Bullion Market from $US1595.50 on Saturday.

"After suffering sharp early losses in the face of eurozone plans to pick pocket the citizens of Cyprus, European indices reclaimed much of the lost ground in afternoon trade, as investors took the view that a European banking run was unlikely in the short term," said Nick Dale-Lace at CMC Markets brokerage.

Terms for a desperately-needed 10-billion-euro ($12.62 billion) bailout for Cyprus include a proposed levy on all deposits in the island's banks.

Deposits of more than 100,000 euros would be hit with a 9.9 per cent charge, and 6.75 per cent for anything below that threshold. The proposal must still be approved by parliament, where it seems to have run into solid opposition.

"The negative reaction in Europe's financial markets to the decision to 'bail in' depositors in Cyprus has been fairly muted so far," said Capital Economics.

Markets were primarily concerned about the potential willingness of EU leaders to replicate the Cyprus actions in other member states if they are deemed successful, according to CMC Markets.

"This is reflected in the underperformance of blue chip banking names across the continent today - particularly in Spain," said Mr Dale-Lace.

Shares in Spanish bank Santander fell by 2.33 per cent, UniCredit in Italy was down by 3.61 per cent, BNP Paribas lost 2.8 per cent in Paris and Barclays Bank was down by 4.41 per cent in London. In Germany, Deutsche Bank lost 1.88 per cent.

The European Central Bank opened the door to possible amendments to the bailout deal however, arguing it was up to the Cyprus government to ensure the necessary financing.

Cyprus is the fourth nation to fall victim to the eurozone debt crisis, which has already resulted in enormous EU/IMF bailout packages for Greece, Ireland and Portugal.

Back in June, meanwhile, Spain looked as if it too would need a rescue as the collapse of its banking system, largely down to a burst property bubble, forced the government into a corner.

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Oil prices slide to January lows on Italy

Source: Supplied

GLOBAL crude oil prices have dived to fresh one-month lows as inconclusive Italian national elections sparked fresh economic uncertainty in the eurozone, dealers say.

Brent North Sea crude for delivery in April sank to $US112.61 per barrel - the lowest point since January 28. It stood at $US112.78, down $1.66 from yesterday's closing level, in later London deals.

New York's main contract, West Texas Intermediate (WTI) or light sweet crude for April, slid to $US91.92 a barrel - a trough last witnessed on January 4. The contract later pulled back to $US92.35, down 76 cents from yesterday.

"Crude oil prices gave back recent gains and slid lower on Tuesday (overnight), following the global downside momentum as uncertainty over the Italian elections limited risk appetite and left investors concerned that Europe's third largest economy may be heading for a hung parliament," said Sucden analyst Myrto Sokou.

"Thus, the focus has switched again to the European debt concerns, with Brent oil retreating back to $US113 per barrel, while WTI crude oil slides lower to retest $92 per barrel."

European equities slumped and the euro hit a near two-month dollar low overnight as dealers assessed the fallout of Italy's political impasse after elections in the indebted eurozone country.

A stronger greenback also makes dollar-priced crude more expensive for buyers using cheaper currencies, denting demand.

"There's a sea of red across trading screens... as the lack of a clear winner in the Italian elections is causing panic amongst investors," said analyst Angus Campbell at trading group Capital Spreads. "The result is a mass sell off of equities, in particular Italian and other banking stocks, the euro and pretty much any other risk asset you can think of."

A political deadlock loomed in Italy as it appeared Sunday's elections failed to produce a clear winner.

Polls show that while the leftists won the lower house, the party run by former prime minister Silvio Berlusconi had more seats in the upper house.

A majority in both chambers of parliament is required to form a government, leaving Italy in a state of limbo.

"Investors will focus their gaze on Italy's election results, which could see the eurozone's third largest economy face political deadlock in the coming months, casting doubt on further progress of economic reforms and rekindling eurozone fears," said analysts at Vienna-based oil consultancy JBC Energy.

"Meanwhile, the West and Iran will get another chance to lift the current stalemate, as talks begin in Almaty on Tehran's nuclear program.

"While the talks are unlikely to yield concrete results, any positive news from the meeting may exert downwards pressure on oil prices."

In Almaty, world powers and key crude producer Iran have exchanged offers in crunch talks aimed at breaking a decade of deadlock over Tehran's nuclear drive.

The two-day meeting comes as sanctions bite against the Islamic republic and Israel still refuses to rule out air strikes to knock out Iran's suspected nuclear weapons push.

The first round of closed-door talks started at around 0830 GMT after an initial bilateral meeting between the Chinese and Iranian delegations.

The world powers are offering Iran permission to resume its gold and precious metals trade as well as some international banking activity which are currently under sanctions, Western officials said.

But in exchange, Iran will have to limit sensitive uranium enrichment operations that the world powers fear could be used to make a nuclear bomb, the sources said.

Tehran insists its nuclear programme is solely for peaceful energy and medical uses.

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Iluka to cut 200 cuts after profit slide

MINERAL sands miner Iluka will axe 200 jobs as it seeks to rein in costs after reporting a 33 per cent slide in full year profit.

Iluka's net profit fell to $363.2 million in 2012 from $541.8 million the previous year.

Revenues dropped to $1.2 billion from $1.6 billion.

Iluka slashed its fully-franked final dividend to 10 cents a share from 55 cents.

Managing director David Robb outlined a series of fresh measures to curtail production and cut costs in 2013, including the loss of 200 jobs.

"As part of the measures outlined, approximately 200 positions within Australian operations will be made redundant, with additional actions in train to reduce costs in corporate, support and contracting areas," he said today. "The actions to curtail production are being implemented as a consequence of the weak market conditions which prevailed in 2012 and resulted in Iluka production volumes exceeding sales for the year."

"While measures were taken to curtail production in 2012, prudent planning for a gradual recovery in demand through 2013 means that further actions to reduce production and lower costs are necessary."

Iluka announced in January plans to cut production and cut jobs after tough trading conditions led to a loss of nearly one-third in revenue during 2012.

At the time, its said its Eneabba operations in mid-west Western Australia will be idled from April, costing 65 jobs.

Other operations in WA, South Australia, Victoria and in the US were also to be idled or operated on reduced rosters.

Mr Robb said the further measures being taken included halving the combined production of zircon, rutile and synthetic rutile.

Total cash production costs would be cut to about $375 million from $583 million through idling operations, reducing employment levels and other actions.

About $50 million would be set aside for restructure and redundancy costs.

Capital expenditure will also fall in 2013 to about $100 million from $167 million.

Mr Robb said there has been some positive, early indications for improved demand in 2013 for Iluka's main products, suggesting a turning point in the current mineral sands business cycle may be near.

Iluka's shares were steady at $10.35 at 10.57am AEDT.

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