Montreal, Canada

Bank are under pressure across Europe again as interbank lending rates continue to rise, credit default swaps surge to protect against sovereign and bank default as Europe's largest banks resume cash hoarding.

Earlier this spring U.S. dollar LIBOR rates rallied to 0.54% from barely 0.30% several weeks earlier as overnight lending grew cautious prior to the EU-IMF announcement to bail out Greece.

Bank stocks across Europe have traversed the infamous "death cross" as short-term and long-term moving averages converge – a bearish signal. German and French banks have the biggest exposure to the Club Med group of battered peripheral EMU countries estimated to be valued north of $1 trillion dollars. The recent bailout has nothing to do with protecting Greece; it has everything to do with protecting German and French loans.

EURIBOR, the European equivalent to LIBOR for EUR interbank lending, continues to rise in June as trouble brews in European credit markets. Tensions in interbank markets have resulted in three-month EURIBOR rates rising for 11 consecutive days to 0.72% this morning – up substantially from barely 0.62% in March. While dollar LIBOR rates have stabilized lately at 0.54% EURIBOR rates are still rising, indicating interbank stress is accelerating in the region.

If the news is pretty much all bad for European sovereign credit markets then the opposite might be true for European multinationals.

The big drop in the EUR since early December has made European companies attractive targets for American multinationals – potentially a feast when combing the low value of the EUR vis-à-vis the dollar and sharply lower stock prices since late April. U.S. large-cap companies are sitting on near-record levels of net cash in 2010 and have been reluctant to deploy capital amid uncertain markets and mixed retail sales data.

Another silver lining for European equities is German large-cap stocks. No other nation in the eurozone benefits more from a lower EUR than Germany – Europe's export machine. Isolating those companies that will benefit from un-hedged currency sales outside of Europe should eventually reward value investors; I'd avoid German banks, however. This assumption makes passive investing potentially a bad idea since financial services are a big component in the Frankfurt DAX with more than half of all German banks – especially Landesbanks -- reliant on state-aid and financial support, including Commerzbank AG.

The history of currency devaluations has clearly shown a path to profits for stock market investors, not bond investors. The blowup of the European Exchange Rate Mechanism (ERM) in 1992 greatly benefited British and Italian stocks 12 months following their humiliating exit from the grid. The same should be true for the largest exporters in the eurozone 12 months from now, especially in Germany.