Europe Bank ETF has its Own Problems

The recent bout of weakness faced by financial services stocks and exchange traded funds is not confined to U.S. offerings.

With Portuguese stocks weakening on concerns over Espirito Santo Financial Group, the country’s largest bank, bond yields in peripheral European nations have climbed in recent days, breathing new life into what had been dormant investor concern regarding the fragility of financial institutions based in PIIGS countries. [Pressure on Portugal ETF]

The bank has been under scrutiny over the past month since an audit found “material irregularities” at the Espirito Santo family holding company, according to a separate Reuters report.

With Thursday’s almost 4% slide, one that occurred on nearly 11 times the average daily volume,  the Global X FTSE Portugal 20 ETF (NYSEArca: PGAL) is off about 11% in the past week.

That weakness has permeated the iShares MSCI Europe Financials ETF (NasdaqGM: EUFN), which has tumbled 4.3% over the same period. EUFN’s glum reaction to the news out of Portugal underscores how seriously global markets take negative headlines flowing from Europe.

The $487.2 million EUFN features exposure to 13 countries and unless Portugal falls into fund’s 2% allocation to “other,” EUFN features no allocation to the country, according to iShares data.