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Tickers in this Article: SPY, DIA, EWP, EWI
In theory, news that European nations will loan Spain $125 billion to bailout the country's crumbling banking system, should have been enough to set global equity markets afire on Monday. The reality was that was far from the case as stocks in Madrid fell half a percent and all three major U.S. indexes plunged more than 1% apiece. Following some big gains for U.S. stocks on Tuesday, the SPDR S&P 500 (NYSE: SPY) and the SPDR Dow Jones Industrial Average (NYSE: DIA) are basically back to where they were on Friday, before news of the Spain bank bailout became official.

So is the iShares MSCI Spain Index Fund (NYSE: EWP), the lone ETF devoted exclusively to Europe's fourth-largest economy. With an almost 42% weight to financials, by far the ETF's largest sector weight, EWP would appear to be a prime candidate to run higher on any news that looks even remotely positive for Spanish banks. That clearly hasn't been the case.

Spain is now the fourth European nation to receive a bailout after Greece, Ireland and Portugal and that seems to be the sticking point for traders across the globe: Does a bailout of Spain's financial system portend a bailout of the country itself? That would be an epic disaster for the the European Central Bank and the International Monetary Fund to deal with because the Spanish economy is far larger than Greece, Ireland or Portugal's.

That's not getting lost among what ebullience is left regarding the Spanish bank bailout scheme. Sure, the ETF is up over 5% in the past week and on a technical basis, the fund has found support at $21.50, but this ETF remains far from inviting. The double-digit yield? Don't fall for it. It's a yield trap.

What cannot be glossed over is the fact that traders exist in a "Who's next?" vacuum. So even though Spain is the center of attention for now, it's not the only European nation garnering negative press. Once traders get tired of pounding Spanish stocks and EWP, they'll pick up with Italian equities and the iShares MSCI Italy Index Fund (NYSE: EWI).

Financials account for over 25% of EWI's weight and while Italian banks are generally viewed as healthier than their Spanish counterparts, that's not saying much. It also doesn't hide the fact that Italy has one of the highest debt/GDP ratios (about 120%) in the developed world and that the country is mired in a deep recession. In other words, it's easy to see why enthusiasm for the Spain bank news waned so quickly.

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