Cyprus Deal Rattles Markets

Markets in Europe and Asia slumped Monday after the weekend's news that Cyprus would tax all of its bank depositors to help fund its bailout.

The move is a first in the euro-zone crisis, and analysts fretted that the tax's wide scope and its sudden nature�banks are shut and Cyprus plans to deduct the levy before they reopen�could shake the currency bloc's wobbly confidence.

For many months, policy makers have tried to encourage euro-zone financial markets to reintegrate: for investors in stronger countries to come back to the weaker-country markets they rushed out of during the crisis's peak. It is far from clear whether the action in tiny Cyprus�an economy of just �18 billion ($23.5 billion)�will cause broader apprehension, but there were signs Monday that markets were on alert.

In early morning trading, investors swiftly dumped stocks across Europe, bonds of troubled euro-zone countries and the euro. By midmorning, stock indexes had come off their lows, but virtually all European bourses remained in the red. In Asia, the Nikkei lost 2.7%.