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Stocks make gains amid rising eurozone hopes

TradingPub Admin | March 20, 2013

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Global equities rose in value on March 20, as markets were bolstered by firming hopes that European Union (EU) lawmakers will be able to keep the challenges being experienced in Cyprus under control. 

Rising stocks
The Associated Press reports that U.S. stocks started out strong, with futures contracts for both the benchmark S&P 500 Index and the Dow Jones Industrial Average 0.3 percent higher when the markets opened. France's CAC-40 was 0.3 percent higher at 3,788 and Germany's DAX was up 0.4 percent at 7,981. 

By 9:52 a.m. in New York, the S&P 500 Index was 0.6 percent higher at 1,557.23, while the Dow Jones Industrial Average was trading up 0.5 percent at 14,530.87, according to Bloomberg. The transaction volume for the equities contained in the S&P 500 was 11 percent lower than the 30-day average for this time in the trading session. 

Investor optimism
Markets were affected on March 19, when Cyprus officials declined a proposal that would have required levies on deposits held in the nation's bank accounts in exchange for further bailout funding, the media outlet reports. 

"Europe has taken the Cyprus rejection of the terms of the EU bailout in stride," Peter Jankovskis, the chief investment officer at Lisle, Illinois-based Oakbrook Investments LLC, told the news source in a phone interview. "Most of the European markets are up, and that's basically what things are reacting to." 

Possible Russia assistance
The day after, hopes grew that the jurisdiction would come to some agreement in order to obtain the funding it needs to stay in the euro zone, according to The Associated Press. The efforts of Cyprus and its lawmakers to generate these finances will likely be a major contributor to the trading activity of investors. 

Many market participants have speculated that Russia would be a likely source of the money, as Cypriot Finance Minister Michalis Sarris scheduled a meeting in Moscow with the Asian nation's top financial official, the media outlet reports. 

"A deal with Russia is clearly seen as the best option in the markets, where investors are piling back into risk assets," Craig Erlam, market analyst at global foreign exchange firm Alpari. 

Cyprus impacts
Reuters reports that while equity markets are holding up well, the impact of the recent Cyprus move can be felt elsewhere in the economy, such as a German bond auction on March 20 that illustrated the sharp demand that some investors have for safe-haven assets. 

These market participants pushed the yields on 10-year German bonds to 1.36 percent, which was the lowest for these debt-based instruments since July 2012, according to the news source. These securities were trading at slightly higher yields in the secondary markets. 

Fed meeting
A meeting of Federal Reserve policymakers will be closely watched by market participants, The Associated Press reports. Neil MacKinnon, global macro strategist at VTB Capital, told the news source that the press conference that Chairman Ben Bernanke plans to hold "will be monitored for clues as to the Fed's eventual exit policy." The Fed chief had planned to hold this meeting at 2:30 p.m. 

The media outlet reports that even though there is evidence that economic growth is picking up, the Federal Reserve decision makers will leave the existing monetary stimulus policies unchanged. 

Economists surveyed by Bloomberg hold the opposite view, thinking that the Federal Reserve will start to water down its existing bond-buying measures. These market experts were polled between March 13 and 18, and have predicted that the central bank will stop purchasing more of these securities during the first six months of 2014, after its portfolio surpasses $4 trillion. 

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