Will Portuguese Banco Espirito Santo Doom European Financial Stocks?

NEW YORK (TheStreet) -- European financial stocks fell below important price levels last week as worries over the health of Portugal's Banco Espirito Santo brought fear into global markets.

Below is a chart of Global X FTSE Portugal 20 ETF (PGAL) and iShares MSCI Europe Financials (EUFN). The two indices have correlated closely since 2011, when the eurozone's debt crisis spread from small peripheral countries across the continent, pulling down every major stock index in Europe along the way.

The MSCI Europe Financials Index is comprised of HSBC Holdings (HSBC), Banco Santander (SAN), Lloyds Banking (LYG), BNP Paribas (BNPQY) and UBS (UBS) among others.

PGAL Chart

PGAL data by YCharts

Shares of European banks rebounded sharply Monday in New York, but price action on many of the charts in the European Financial Index still looks broken.

Banco Espirito Santo renewed fears over potential bank failures and the contagion risk that could come along with it last week after announcing that Espirito Santo International, the conglomerate that holds a stake in the bank, had delayed coupon payments relating to some short-term debt securities.

Banco Espirito Santo's stock subsequently dropped more than 17% before trading in its shares was suspended on July 10.

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