WSJ; Overheard " Bloodletting Not In Vein -:When Europe Sniffles, Morgan Stanley Catches A Cold

There's new truth to the old saw about market pangs. "U.S. markets slid on fear that Italian-election results will rekindle the euro crisis. Financial stocks got clobbered: Morgan Stanley led the way down with a 6.6% decline. That was due to long-standing worries about financial contagion if the euro zone falls apart. And, fair or not, Morgan is still seen as the weak link in the too-big-to-fall chain.

Meanwhile, like plenty of others, Morgan had recently been feeling better about Europe. The firm reported that total exposure to financially stressed euro-zone countries rose to $6.4 billion in the fourth quarter, compared with a $4.8 billion in the third. Ironically, the firm increased its negative bet on French sovereign debt, while its positive exposure to Italian sovereign debt stayed flat.

Such exposures should be manageable for a firm of Morgan's size. Even so, when investors have a knee-jerk reaction to Europe, Morgan is the one that usually gets kicked.