Two months have passed since the EuroStoxx 50 entered a corrective phase, and it was consumed by it until Monday. Throughout this time, the index has given up nearly 7% (losing some 3,000 points) while other European indices lost some yearly earnings and technical support.
During 61 days of unrest on account of Greece?s financial problems, the bears? whips have been beating the European banking industry. "The drawdowns come out of an overall negative scenario and high risk aversion that signify what has negatively impacted the European banks such that the entire sector witnesses a relatively large drop," explained Javier Flores of Dracon Partners.
It is true that from April 29 until now, the firms in Stoxx?s banking sector have suffered 5% drawdowns on average for their 2011 earnings predictions.
Paradoxically, of the three surefire cases where firms have suffered significant cuts in their earnings predictions, only one is Greek (Piraeus Bank). And this bank is not the worst off.
Dexia is the worst case
The Belgian firm Dexia has suffered the worst. At the end of April, market consensus estimated that it would close with earnings of 677 billion euros. Now, the consensus is that they will show losses close to 3 billion.
Translated and Edited in English by Brandon Dyches and Jose L. De Haro
