* European shares steady after recent Cyprus-fuelled
* Euro remains near four-month low
* Bunds steady near three-week highs
By Marc Jones
LONDON, March 26 European shares and the euro
were flat on Tuesday, losing early gains as investors fretted
that Cyprus's raid on bank deposits could become the template
for future euro zone bailouts.
Wall Street was expected to see a rebound from Monday's
losses, meanwhile, with a flurry of data expected to trump euro
zone concerns by supporting hopes of a gradual U.S. recovery.
Banks in Cyprus remain closed following the country's 10
billion euro bailout agreed at the weekend, but comments from
Jeroen Dijsselbloem, the new head of the Eurogroup of euro zone
finance ministers, have stripped investors of the appetite for
the kind of rebound that has followed other rescue deals.
Dijsselbloem said on Monday that the tactic used in Cyprus
of getting wealthier savers and uninsured bondholders to bear
heavy losses represented a new template for resolving regional
After a choppy morning, top European shares and
MSCI's index of world shares, which tracks 6000
stocks in 45 countries, were both flat on the day ahead of the
Wall Street restart.
Investors continue to weigh the possibility that the euro
zone crisis could escalate if savers in other debt-strained
countries such as Spain and Italy pull money out of their own
banks as a precaution following the grab on deposits in Cyprus.
"Dijsselbloem comment's will stay the focus of markets,"
said ABN Amro economist Joost Beaumont.
"Markets are recovering a little bit, and with the ECB
(European Central Bank) now the lender of last resort it is hard
to see a return to the depths of the crisis, but it is difficult
to see a sharp rebound."
By 1245 GMT, Paris's CAC-40 was leading the way with
gains of 0.6 percent. London's FTSE 100 and Frankfurt's
DAX were up 0.2 percent, though fears of tough
conditions being attached to future bailouts were being felt in
Madrid, where the IBEX fell 1.5 percent.
The decision to seize savings in Cyprus, as well as impose
capital controls to prevent mass withdrawals once banks do
reopen, has added a new dimension to the euro zone's three
Top ECB policymaker Benoit Coeure tried to assuage the
concerns caused by Dijsselbloem's comments, stressing the
banking crisis in Cyprus was a unique case.
"I think Mr. Dijsselbloem was wrong to say what he said. The
Cyprus experience is not a model for the rest of Europe because
the situation had reached a level which cannot be compared with
any other country," Coeure said in a radio
Earlier, shares in Asia had edged lower but
Wall Street was expected to rebound by around 0.2 percent as a
5.7 percent climb in durable goods orders in February got a busy
day of U.S. data off to positive start..
Economists polled by Reuters had expected orders to rise 3.8
percent after a 4.9 percent fall in January.
Investors in the bond and oil markets remained cautious.
Safe-haven German government bonds held near highs hit the
previous session, while Brent crude dipped back to $108
a barrel, near last week's three-month low.
Alongside the fallout from Cyprus, euro zone investors are
also facing a lengthy spell of political uncertainty in Italy
and an increasing divergence between strong European economies
like Germany and its struggling neighbours.
French consumer confidence underscored the last of those
worries, falling more than expected in March as worries about
surging unemployment mounted.
Having tumbled to a four-month low on Monday following
Dijsselbloem's comments, the euro remained weak at
$1.2860 against the dollar. Measured against a basket of
currencies, the dollar was also little changed.
The euro has largely held its ground during the recent
turmoil in Cyprus, but the likelihood of depositors being hit in
future bank bailouts could drive it lower, analysts say.
"The developments yesterday were quite negative for the euro
as it looks to be a bit of a change in policy approach within
Europe with respect to bailouts. They seem to be putting the
emphasis onto investors rather than taxpayers," said Ian
Stannard, head of European FX strategy at Morgan Stanley.
"That is going to keep the euro under pressure as it could
well deter foreign investors from returning to peripheral
Gold, which typically benefits from economic uncertainty and
has rallied during the Cyprus turmoil, fell back below $1,600 an
The ECB's promise to keep the euro together has largely
limited the fallout from Cyprus's problems and Italy's political
deadlock, and many economists see little reason for that to
change in the near term.
"The reaction of the market has demonstrated clearly that
the kind of problems in Cyprus could be contained, and even an
escalation of the crisis with all the possible outcomes from
other periphery countries has not really dented market
confidence," Commerzbank gold analyst Eugen Weinberg said.
"We see prices consolidating at current levels around the key