* Shares rise, oil gains after Cyprus gets bailout
* But Cyprus deal could set precedent within euro zone
* Euro retreats after initial gains to Cyprus deal
* U.S. Treasury bond prices fall
By Herbert Lash
NEW YORK, March 25 (Reuters) - Global equity markets and oil
prices rose on Monday after Cyprus agreed to a painful bailout
that will avert a collapse of its banking system and keep the
country within the euro zone.
Cypriot policy-makers reached an eleventh-hour deal with the
European Union, the European Central Bank and the International
Monetary Fund to shut down its second largest bank in return for
10 billion euro ($13 billion).
The bailout brought immediate relief to investors who had
feared Cyprus might default. But the deal will inflict heavy
losses on depositors, including wealthy Russians, on deposits of
more than 100,000 euros, which are not guaranteed under EU law.
Wall Street opened higher, following gains in European
equity markets, in a relief rally that a financial meltdown had
been averted in Europe. Safe-haven assets such as U.S.
Treasuries and gold prices fell.
"The problems in Cyprus had held the market back a little
bit, so I guess there will be some relief. This takes away one
of the hurdles for moving higher," said Rick Meckler, president
of hedge fund LibertyView Capital Management in Jersey City, New
The Dow Jones industrial average was up 31.41 points,
or 0.21 percent, at 14,542.36. The Standard & Poor's 500 Index
was up 6.08 points, or 0.39 percent, at 1,562.97. The
Nasdaq Composite Index was up 10.49 points, or 0.32
percent, at 3,255.49.
The pan-European FTSEurofirst 300 index of leading
regional shares pared some gains to trade 0.61 percent higher at
MSCI's all-country world equity index rose
0.43 percent to 360.29.
Oil also joined in the rally in risk assets. Brent crude
rose 89 cents to above $108.55 a barrel as hopes that
the avoidance of a more severe outcome in Cyprus could brighten
the outlook for a revival in demand.
U.S. light sweet crude oil rose $1.21 to $94.92 a
But the euro and German Bund futures retreated after initial
gains as concerns emerged about the implications of the deal.
The Cyprus deal was unlike previous peripheral euro zone
country bailouts, which have protected bank deposits.
"The critical issue remains that of precedent for larger
Eurozone countries, and the way in which the Cyprus situation
has been managed does not seem to inspire a great deal of
confidence," said Ilya Spivak, a currency strategist at DailyFX
in New York.
Traders in Europe said there were already second thoughts on
"The loss of confidence in the European banking system
stemming from the Cypriot crisis will not only weigh on the
banks but also on the economy of the region," added a
"The market is beginning to wake up to what's going on in
Europe," said Ronnie Chopra, a strategist at TradeNext.
The euro fell as low as $1.2916 and last traded at
$1.2931, down 0.4 percent on the day, according to Reuters data.
German Bund futures were up 1 ticks on the day at
144.38, having fallen as low as 143.91.
The benchmark 10-year U.S. Treasury note was
down 6/32 in price to yield 1.9458 percent.