European stocks are set to open higher on Monday after Eurozone finance ministers reached a last-minute agreement with Cyprus on a 10 billion euro bailout deal, averting an imminent collapse of the country's financial sector. The plan envisages splitting Laiki or Cyprus Popular Bank immediately into a good bank and bad bank, with the good bank to be folded into the Bank of Cyprus.
Holders of deposits above 100,000 euros in Laiki are forced to take losses, while the bank's deposits of less than 100,000 euros will be transferred to the Bank of Cyprus. Bank of Cyprus will be recapitalized through a deposit or equity conversion of uninsured deposits with full contribution of equity shareholders and bond holders. The conversion will be such that a capital ratio of 9 percent is secured by the end of the program. The bailout money of EUR 10 billion will not be used to recapitalize Laiki and Bank of Cyprus, the Eurogroup said in a statement.
The European Central Bank will provide liquidity to Bank of Cyprus, but the uninsured deposits will remain frozen until recapitalization has been effected. All insured depositors and deposits up to EUR 100,000 in all banks will be protected in accordance with the relevant EU legislation.
Asian markets are trading mostly higher in line with positive global risk sentiment after the Cyprus deal put an end to over a week-long uncertainty over the fate of the Mediterranean Island. Cyprus also committed to step up reform efforts in the areas of fiscal consolidation, structural reforms and privatization.
In economic releases, house prices in the U.K. advanced at the fastest pace in three years in March, driven by a notable improvement in the capital city on higher property demand, a survey by property researcher Hometrack showed. House prices in England and Wales rose 0.3 percent in March from the prior month, the biggest increase since March 2010.
Across the Atlantic, traders will likely keep an eye on a batch of key U.S. economic data this week, including reports on durable goods orders, new home sales, and Chicago-area business activity. Nonetheless, trading activity may be somewhat subdued, as some traders are likely to be away from their desks ahead of the Easter weekend.
In domestic corporate news, French luxury and retail group PPR SA announced that it is changing its name to KERING subject to the approval of the annual general meeting to be held on 18 June 2013.
British defense company BAE Systems Plc. has bagged a contract worth as much as $780 million from the US Army for producing explosives at the Holston Army Ammunition Plant in Tennessee.
Swiss food and nutrition products giant Nestlé S.A. has recalled tens of thousands of Kit Kat chocolate bars and Easter eggs from sale after it received complaints of finding plastic in the sweets, media reports said.
British beverages giant Diageo Plc. is in talks with Chinese authorities to increase its indirect stake in ShuiJingFang, the Chinese liquor maker behind upmarket baijiu drinks brand, according to the Sunday Telegraph.
Sanofi and Transgene SA announced a collaboration agreement for the creation of an industrial platform for the production of immunotherapy products including Transgene's therapeutic products.
European stocks ended Friday's session mostly lower on persisting concerns over Cyprus as lawmakers scrambled to avoid a meltdown of their banks and an exit from the euro union. Benchmark indexes in France, Germany and Switzerland fell between 0.1 percent and 0.3 percent, but the U.K.'s FTSE 100 edged up marginally.
U.S. stocks rose on Friday in light trading after Nike Inc. and Tiffany & Co. reported strong quarterly earnings and investors grew more optimistic that Cyprus would clinch a deal with its international creditors to avert a default. The Dow rose 0.6 percent, while the tech-heavy Nasdaq and the S&P 500 gained about 0.7 percent each.
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