Greece Debt Woes Weigh on Bank Stock
Shares of all major banks ended up contracting in Wednesday trading as doubts about Greece’s ability to stick to a stringent austerity plans sunk investor sentiment. While the €130 billion ($172 billion) bailout package for the troubled country from other European Union members will ensure that Greece does not default in the near future, the rather steep spending & budget curtailments laid out may prove impossible for it to adhere to.
Fitch Ratings’ decision to downgrade the country’s long-term debt rating to the lowest possible level of ‘C’ also did not help investor confidence. [1] And to make things worse, Markit’s Eurozone Services Purchasing Managers’ Index (PMI) shrunk more than expected, renewing fears of a double-dip recession for Europe. Shares of RBS (NYSE:RBS), Citigroup (NYSE:C), Barclays (NYSE:BCS) & Morgan Stanley (NYSE:MS) each shed around 3% of their value. The KBW Bank Index declined 2% over the day.
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Notes:- Fitch Downgrades Greece to ‘C’ from ‘CCC’, Fitch Ratings, Feb 22 2012 [↩]