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UPDATE: 5 things to know about Banco Espirito Santo and Europe

UPDATE: 5 things to know about Banco Espirito Santo and Europe

07/11/2014

By William L. Watts, MarketWatch

U.S. stocks saw some early pressure, and investors piled into safe havens such as gold, U.S. Treasurys and German bunds, after problems at a major Portuguese financial institution on Thursday revived memories of the darkest days of the euro-zone debt crisis.

Despite the knee-jerk reaction, investors shouldn't panic. But the situation does serve as an important reminder that Europe hasn't left its troubles behind.

On the following pages are five things you should keep in mind.

-- William L. Watts

-William L. Watts; 415-439-6400; AskNewswires@dowjones.com

It's still all about Italy and Spain

Italy and Spain, the euro zone's third- and fourth-largest economies, respectively, have always marked the potential point of no return for the debt crisis. European Central Bank President Mario Draghi's pledge to do "whatever it takes" to preserve the euro and the subsequent unveiling of the ECB's OMT bond-buying program turned the tide, pulling 10-year borrowing costs for both countries back from near or above an unsustainable 7%. In fact, bonds from the euro zone's periphery then went on a monumental rally. Italian and Spanish five-year yields, for example, remain more than half a percentage point below their U.K. counterpart.

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