Shares of major banking institutions are on the receiving end of investor ire yet again as a series of global developments prompted investors to turn away from the stock market. The markets took a beating on Monday, with politicians and central banks of Eurozone nations discussing the possibility of Greece’s exit from the Euro. China’s decision to cut its monetary policy also renewed fears of a global slowdown. While prices were struck across sectors in the stock market, banking stocks took a particularly heavy beating in the aftermath of JPMorgan’s (NYSE:JPM) $2 billion trading loss. Discussions about the vulnerability of other major banks – primarily Bank of America (NYSE:BAC) and Citigroup (NYSE:C) – to such situations in the future were brought to the forefront with regulators seeking more information about the trading loss.
Barclays (NYSE:BCS) shares were down over 5% on Monday, followed by a decline of more than 4% in the shares of Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C). The KBW Bank Index ended the day with a 2.6% loss in value.
Global economic concerns came back to haunt investors when Greece’s ability to stick to its austerity pledges was questioned after the country failed to set up a government a week after its elections. The situation was exacerbated when the possibility of Greece’s exit from the Euro was brought up by leaders of Eurozone nations – something that does not bode well for the strength of the euro.
In conditions reminiscent of the second half of 2011, bank stocks bore the brunt of the series of negative macroeconomic developments. While the declined in the share priced of European banks can be understood because of their widespread business in the region, Morgan Stanley led the decline among U.S. banks due to its considerable exposure to Europe – a phenomenon witnessed too regularly last year. Morgan Stanley’s fixed income, currencies and commodities (FICC) trading assets are the most vulnerable among those of major U.S. banks to any decline in Europe’s economic situation.