Eurozone Displays Muted Reaction to the Greek Referendum Vote



Eurozone stocks fall modestly

Eurozone shares, represented by the SPDR EURO STOXX 50 ETF (FEZ), fell by 3.7% on Monday—a fairly subdued reaction to Greek voter rejection of continued austerity measures. Overall market fallout was relatively contained. Germany’s DAX fell by 1.5%, while the CAC-40 in France fell by 2%.

Banks bore the brunt of the sell-off, with the iShares MSCI Europe Financials ETF (EUFN) falling by 3.1% on Monday.

With stock markets in Athens shut, investors traded Greek shares listed in the United States. ADRs (American depositary receipts) of the National Bank of Greece (NBG) fell by ~14%, while others, such as Banco Santander (SAN), fell by 3.7%, and the Global X FTSE Greece 20 ETF (GREK) fell by ~7.5%.

The Greek economy is too small to cause a global spiral of economic doom. The share of the Greek economy in the Eurozone GDP (gross domestic product) is just about ~1%, and only 19 countries are using the euro.

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Greece may not be that important

The links between other Eurozone countries and Greece are modest. Exports to Greece—excluding Cyprus—represent less than 0.5% of Eurozone exports. The global banking system has reduced its Greece exposure, from a massive $300 billion in 2008 to $54 billion as of mid 2014, according to Deutsche Bank (DB).

Several big banks say the risks of a Greek exit from the Eurozone had risen since Sunday’s “No” vote. Investors point to the European Central Bank’s capacity to limit financial contagion and step in if market turmoil spreads.


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