Can we take a summer vacation from the euro crisis this year?


Ah, summer. The best time for backyard barbeques, outdoor fun … and a European banking crisis.

In what has seemingly become an annual ritual, the eurozone crisis is back in the headlines spooking investors. This time, the trouble is emanating from Portugal, where bond yields have jumped on concerns over the financial system.

The parent company of Banco Espírito Santo (BES), one of Portugal’s largest banks, this week said it has delayed the payments on some of its debt.

“The tumult is a stark reminder that investors — despite recent optimism about Europe — are still worried about the overall health of the region’s financial system,” the New York Times reports.

Recent weakness in European financial stocks had hinted that something could be amiss.

The iShares MSCI Europe Financial ETF (EUFN) has broken a key support level from a so-called rising wedge pattern, which could signal a reversal. Chart below from Kimble Charting Solutions:


Markets appear to have settled down after Thursday’s initial shock, which was noteworthy because markets have been so calm lately.

For investors, the flare-up in Portugal has triggered a “eurozone crisis flashback,” writes Dean Popplewell for Forbes.

“The knock-on effect began a global equity and periphery bond rout and a mini-break from risk trading that saw markets pivot from euphoria to ‘Europhobia,’” he wrote. “Anything affecting one eurozone periphery member basically affects all nowadays — the yields on other peripheral members sovereign bonds also blew out, reminding all of the darkest days of the euro debt crisis.”

This week’s bout of volatility has “at least woken the market up from its deep slumber,” Popplewell added.

Like summer movie blockbusters, it’s the season for the European debt concerns to heat up.

But hopefully this year we can take a vacation from the euro crisis.

Large money managers don’t expect the worries over one of Portugal’s largest lenders to have a lasting impact on global financial markets depite a rout in Europe’s markets Thursday,” reports’s MoneyBeat blog.

“This particular incident seems fairly isolated to the Portuguese bank as opposed to a return to the eurozone crisis of a few years ago,” said Eric Stein, global fixed income portfolio manager at Boston-based Eaton Vance.

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Charles Sizemore

Charles Sizemore