Dow Shrugs Off Greece, Looks to Spain

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The outcome of yesterday's Greek elections has failed to provide the shot in the arm many expected this morning, as the overseas rally sparked by a New Democracy victory has faded and U.S. markets have opened lower. The reason: widespread European concerns still remain, with developments in Greece and Spain persisting as primary news this week. Here's a snapshot of the major U.S. indexes shortly after the opening bell.

Index

Gain/Loss

Gain/Loss %

Intraday Value

Dow Jones Industrial Average (INDEX: ^DJI)  (67.7)(0.5%)12,699
S&P 500 (INDEX: ^GSPC) (8.1)(0.6%)1,335
Nasdaq (INDEX: ^IXIC) (17.0)(0.6%)2,855

Source: Yahoo! Finance.

Greece
The truth of today's news is that the debt crisis is far from over in Greece, and worries over Spain continue. Despite a New Democracy victory yesterday, creating a coalition with the socialist Pasko party is next on the docket, and likely followed by the all-too-familiar process of renegotiating bailout terms. These developments will be front and center for investors worldwide, particularly for the one group most exposed to the Greek debt crisis: European banks! However, there are some significant differences in exposures across the eurozone. According to the Bank for International Settlements, French banks dwarf their neighbors in terms of Greek exposure, with loans of over 40 billion euros, well ahead of No. 2 Germany (at about €13 billion). According to some estimates, Greek debt losses for French bank Credit Agricole could be as high as 5 billion euros through their Greek subsidiary, Emporiki Bank.


Spain
Many are looking to Spain as the proverbial next shoe to drop in the European crisis. While its public-debt-to-GDP ratio is significantly lower than Greece, the situation is anything but stable. Government bond yields have recently hit record highs, the country's unemployment rate is a staggering 24%, and the banking sector is reeling from the burst of its own property bubble. New data out this morning on Spanish loan performance hasn't helped matters, either, as the percentage of loans more than 90 days delinquent has risen to 8.7%, an 18-year high. In early trading, shares of Banco Santander (NYS: SAN) and Banco Bilbao Vizcaya Argentaria (NYS: BBVA) were trading about 4% lower in response.

Opportunity in chaos
The crisis in Europe is far from over, but that doesn't mean investors should panic and employ the mattress strategy. In fact, while some banks are front and center given their exposure to an ailing European economy, some of the world's smartest investors are actually looking for opportunities in the sector. Find out who they are, and what they're buying, in our special free report: "The Stocks Only the Smartest Investors Are Buying." This report is available for a limited time only, so claim your free copy by clicking here now.

At the time this article was published Brenton Flynn owns no shares in the companies mentioned. The Motley Fool has a disclosure policy.
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