Shares dive as European crisis flares A FLARE-UP in Europe's debt crisis has sent the sharemarket to its second-largest sell-off in nine months as investors fret about a run on European banks. After a bull run for local stocks since June in a period of relative calm in Europe, a bearish mood swamped Asian markets yesterday after analysts warned that Cyprus's proposed levy on bank accounts could lead to bank runs in bigger eurozone economies, including Greece and Spain. Cyprus at the weekend became the fifth eurozone nation to seek support after agreeing with European officials to a bailout program, including a tax of 9.9 per cent on deposits in excess of E100,000 ($124,950) and 6.75 per cent on small depositors. Bendigo and Adelaide Bank's Delphi Bank, previously the Bank of Cyprus Australia, said there would be no impact on customers after the local Cypriot community expressed concern. The dramatic developments, which were to be voted in the Cypriot parliament overnight, led to a 105-point, or 2.05 per cent, sell-off in the S&P/ASX 200 to 5015 -- its biggest fall since May -- as the dollar dipped to $US1.0367 but rallied above 80 euro cents. Investors moved into debt markets, with the local 10-year bond yield down 13 basis points. Stockmarkets in Hong Kong and Japan dived 2.2 per cent and 2.4 per cent, respectively, while futures markets pointed to a decline on Wall Street, with futures for the Dow Jones Industrial Average off 154 points yesterday. Matt Sherwood, head of investment market research at fund manager Perpetual, said the next chapter in the European debt crisis had arrived, and the big risk was that larger nations could be affected if the European Central Bank failed to make clear that Cyprus's deposit tax was a one-off. "It's been a real wake-up call to people who thought Mario Draghi's policies meant the end of the European debt crisis," he said. It's really going to come down to the political will of the Cypriot government, or their ability to get this through, and if they can't there's going to be heightened uncertainty. This has real potential to become destabilising for markets if it's poorly handled . . . we're in the early stages and we're going to find out really in the next 48 hours where it's going to lead to. ECB president Mario Draghi last year calmed markets by claiming the bank would do "whatever it takes" to preserve the euro, sparking a nine-month rally in global equity markets that saw the local market breach the 20 per cent bull market threshold. The rally, supported by the US Federal Reserve's ongoing quantitative easing, raised fears that markets had moved ahead of the underlying economy, as companies relied on cost-cutting to boost profits and economic growth was clouded by soft activity in non-mining sectors. But Goldman Sachs sales trader Richard Coppleson said yesterday's pull-back was "healthy" and there were bullish signals coming out of the US market. Cyprus represents less than 0.25 per cent of eurozone GDP. "The bears were grinning like they had just won lotto -- coming for them after nine miserable months where they kept saying the rally was a false one and seeing it surge 29 per cent in that time," he said in his daily report. The reality is that this isn't really about Cyprus -- it's just a trigger . . . we want a pullback, we need a pullback and almost everyone I speak to is wishing for a decent fall to buy stocks. Mr Sherwood agreed that the market had been trying to sell off, but the uncertainty in Europe made it crucial to pick stocks with strong balance sheets and operating models to generate surplus cashflow "in what could be difficult economic times." IG chief market strategist Chris Weston said: "It was predictable that we were going to see a 1 per cent-plus move."