Cyprus, for a small island, knows how to carve out a place in history. It was, for instance, according to ancient Greek lore where the goddess Aphrodite emerged from the sea.

It added to its claims to fame, or infamy, at the weekend by planning to impose a levy on bank deposits to meet terms Brussels has laid down for Cyprus to gain E10bn in bailout funds.

The original scheme was for 6.75% levy on deposits under E100,000, with accounts holding more than that taxed to the tune of 9.9%, although that may apparently be revised.

Whatever, the impact was felt not just on Cypriot depositors, but on financial markets around the world, which posted blanket losses, rediscovering that "risk off" feel which has been absent of late, when assets have been ploughing more their own furrows.

'Broken another taboo'

After all, there is always a risk, now that this levy is out of the bag, that it will be imposed on other countries potentially needing bailouts (and Cypriots might with some justification scream foul if it was not).

Morgan Stanley said that saying the introduction of the tax "seems to have broken another taboo", warning investors to "expect material market weakness in the near term".

Certainly, if eurozone depositors are withdrawing cash en masse from banks, it didn't appear to be ending up in investments as of 09:30 UK time (04:30 Chicago time) on Monday, when markets around the globe were posting losses.

In Asia, shares posted a 1.7% loss in Tokyo, a 0.9% fall in Seoul and fell 1.7% in Shanghai.

'Global anxiety'

Agricultural commodities fell in Asia too, with rubber tumbling over 4% in Tokyo to 270.90 yen a kilogramme, although it did recover a wafer of ground in the evening session.

In Kuala Lumpur, palm oil fell 0.7% to 2,400 ringgit a tonne, losing some of the 2.1% price rise it posted on Friday.

Indeed, Phillip Futures warned earlier on that the "increase in palm oil prices may not be sustainable as the commodities market struggles to understand the implication and repercussion of the latest bailout measure in Cyprus.

"The global anxiety due to Cyprus might be the catalyst for palm oil prices to fall further."

Shorts closed

And losses were the order of the day in Chicago too.

Agricultural commodity speculators might regret their mass closing of short positions as shown up by latest weekly positioning data released late on Friday by the US Commodity Futures Trading Commission.

Managed money positioning in the major US-traded commodities turned more bullish in the week to last Tuesday for the first time in five weeks, and by more than 100,000 contracts, the biggest amount for any week since July.

Only in feeder cattle futures and options did hedge funds extend a net short position, with bullish swings particularly large in Chicago corn and New York raw sugar.

'Good opportunity'

Still, at least the positioning increased scope for reversing course, with raw sugar indeed proving one of the US ag commodities more greatly affected by the Cyprus-inspired sell-off, losing 1.6% to 18.59 cents a pound, having in the last session crossed at one point back above the psychologically-important 19 cents-a-pound mark.

And upward direction might not be lost, if investor confidence can regain its footing.

"Sugar prices have been supported by proposed and potential changes in ethanol policies in Brazil, and port delays in the same country," Joyce Liu at Phillip Futures said.

"Although support from port delays may be removed in the weeks to come, we expect changes in ethanol policies to lift sugar futures above 19 cents per pound come April," she said, viewing "any retracement as a good opportunity to long the market".

Dow vs ags

New York cotton fell even more, by 2.0% to 90.70 cents a pound.

The fibre, as an industrial commodity, often tends to move more in line with the macroeconomic mood than other ags, and in the past has shown a close correlation with the Dow Jones Industrial Average.

(Given the similar performance of shares and cotton this year, has that correlation become closer again? Answers to newsdesk@Agrimoney.com please.)

That said, some have also said that shares and livestock futures can move in line…

"I remember once hearing that if the Dow rallied, it meant people felt richer and was friendly to livestock markets," Mike Mawdsley at Market 1 said.

"It appears traders can't get out of some commodities fast enough. Charts for the meats have been ugly and look horrible to end last week," which feeder cattle closed at their lowest since July.

Following China

Among Chicago crops, soybeans extended losses, on course for a fifth successive session of decline, little helped by declines in prices on the Dalian exchange in China, the top importer of the oilseed, whose demand (and where from) is being especially closely monitored.

Dalian soybeans closed down 0.6% at 4,730 yuan a tonne, with soyoil down 0.4% at 8,050 yuan a tonne and soymeal off 2.7% at 3,202 yuan a tonne, all for September delivery.

In Chicago, May soybeans were 1.1% down at $14.10 ¼ a bushel, soymeal 1.4% lower at $413.10 a short ton, and soyoil off 0.9% at 49.49 cents a pound.

One US broker said the relative performance of commodities in the soy complex "made sense" given the "sizable net long soybean/soymeal positions, and very sizable net short soyoil positions", meaning oil may be close to the limit of short levels hedge funds feel comfortable with.

If there was any frost over the weekend in Argentina, fears of which had been raised last week as a concern, it failed to support prices much.

'Precipitation below expectations'

Grains did a little better than soybeans in Chicago, but not much, and despite some iota of bullish news for wheat.

Weather service MDA noted that "weekend precipitation was slightly below expectations" in the US, meaning a little less in the way of further help for drought-hit winter wheat seedlings.

Furthermore, Jordan tendered for 100,000 tonnes of wheat, and the same of barley, a reminder of the demand still out there.

Nonetheless, wheat for May fell 0.9% to $7.16 ¼ a bushel, while corn for May dropped 0.8% to $7.11 a bushel.