Morgan Stanley, Citigroup Lead Bank Stocks Lower on Greece’s Referendum

Morgan Stanley (MS) fell as much as 12 percent in New York trading, leading financial stocks lower on concern a Greek referendum on Europe’s bailout plan will worsen the region’s debt crisis.

Morgan Stanley dropped $1.11, or 6.3 percent, to $16.53 at 10:37 a.m., the biggest decline in the 81-company Standard & Poor’s 500 Financials Index, which slid 2.3 percent. Citigroup Inc. (C) fell 4.3 percent and JPMorgan Chase & Co. (JPM) decreased 4.1 percent.

Greek Prime Minister George Papandreou plans to hold a referendum after details of last week’s second bailout package for Greece are approved. The move poses a threat to financial stability in the euro region and increases the risk of a “disorderly” default, Fitch Ratings said.

“Macro uncertainty is certainly the word of the day,” Thomas Brown, chief executive officer of Second Curve Capital LLC, said on Bloomberg Television’s “In The Loop.” “There is a lot of concern that the European solution is going to fall apart and we’re going to have a global recession.”

Morgan Stanley has dropped 14 percent in the past two trading days. Shares of the New York-based firm rallied 27 percent during the previous two weeks as the firm reported earnings that beat analysts’ estimates and said it had $2.1 billion of net exposure to the peripheral European countries.

MF Global Holdings Ltd. (MF) became the first U.S. bank to collapse under the weight of the crisis, filing for bankruptcy yesterday after a $6.3 billion bet on European debt.

Missing Funds

U.S. regulators are investigating whether hundreds of millions of dollars are missing from client accounts at MF Global, according to two people with knowledge of the matter. The firm was ordered by the enforcement division of the Commodity Futures Trading Commission to preserve records for the review, one of the people said.

EU leaders carved out a second aid package for Greece at a summit in Brussels last month after Papandreou scraped together parliamentary approval for the second round of austerity measures in four months. Greece will receive 130 billion euros ($180 billion) in public funds plus a 50 percent writedown on Greek debt, following a fully taxpayer-funded package of 110 billion euros extended in May 2010.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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Morgan Stanley Leads Bank Shares Lower

Scott Eells/Bloomberg

Morgan Stanley has dropped 14 percent in the past two trading days.

Morgan Stanley has dropped 14 percent in the past two trading days. Photographer: Scott Eells/Bloomberg

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Nov. 1 (Bloomberg) -- Thomas Brown, chief executive officer of Second Curve Capital LLC and a Bloomberg Television contributing editor, talks about MF Global Holdings Ltd.'s collapse and a probe into the firm's client accounts. Brown, speaking with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop," also discusses the impact of the European debt crisis on financial markets. (Source: Bloomberg)