Greek Prime Minister George Papandreou shook financial markets worldwide today with the shocking announcement that he will submit the European bailout plan, created in a deal reached on Oct. 27, to the Greek people for acceptance by referendum. The decision baffled analysts and sent markets into a freefall across Europe and the globe, hitting stocks in the financial sector the hardest.
European Banks are Hardest Hit
Major European banks took the hardest fall, as their stocks plunged on the news that the bailout plan could potentially be in jeopardy. For weeks, stocks from the financial sector have been highly volatile, shooting up or down on any news regarding the debt crisis in Europe, and today was no exception. The MSCI Europe Index was down 2.2 percent while the Bloomberg Europe 500 Banks And Financial Services Index dropped over 6 percent in early trading. The Euro also plunged in value on the news of Papandreou's decision to leave the future of the bailout to the Greek people, 60 percent of whom view it negatively. Predictably, the National Bank of Greece (NBG) was among the big losers, with its stock moving down nearly 11 percent. However, no European banks seemed immune as France's Societe Generale SA (SCGLY) dropped over 14 percent, the Bank of Ireland (IRE) was down over 11 percent, Switzerland's ING Groep (ING) tumbled over 13 percent, English Barclays PLC (BCS) dove nearly 8 percent, and Credit Suisse (CS) lost over 7 percent.
European, Financial ETFs Also Moving
Exchange-traded funds linked to European indexes also plunged on the news out of Greece. The iShares MSCI Europe Financials Index (EUFN), an ETF that tracks European financial equities, was down nearly 5.5 percent. Other ETFs linked to the financial sector saw serious hits as well, with the Financial Select Sector SPDR (XLF) and the Vanguard Financials ETF (VFH), both of which track the financial sector as a whole, falling over 3.5 percent. Banking sector ETFs dropped as well as the SPDR KBW Bank (KBE), which seeks to replicate the S&P Banks Select Industry Index, showed losses in excess of 4 percent.
ETFs that try to replicate European equity markets followed their indexes south and dropped across the board. The Vanguard MSCI Europe (VGK) dropped over 3 percent, the iShares MSCI Italy Index (EWI) lost nearly 6 percent, iShares MSCI Germany Index Fund (EWG) fell over 4 percent, and iShares MSCI France Index (EWQ) plunged over 5.5 percent. Any investors anticipating continued debt issues in Europe were rewarded, though, as the ProShares UltraShort MSCI Europe (EPV) saw gains exceeding 6 percent.
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