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Takeaway: The Italian stock market led the losers this morning and German bank stocks are getting crushed as economic reality rules the day.

Europe On The Brink? When Bad = Bad - Italian bank cartoon

What happens when bad economic data = bad news for stocks?

Look no further than Italian equities.

For some time now, Italian banks stocks have been pricing in Europe's already gloomy economic reality remaining a protracted slump. 

Bank stocks just happen to be among the most impacted by this economic slowdown, as the ECB's negative interest rate policy crushes profitability (see net interest margin) and nonperforming loans plague their balance sheets. The evidence of this negative feedback loop is littered throughout the Eurozone. 

(Click here for our most recent look at the ongoing carnage in Italian bank stocks.)

Take Deutsche Bank for example.

In the past 11 months, shares of Germany's largest bank are down -62% and the stock plummeted on Monday on rumors that the company was seeking aid from Berlin, since the bank remains undercapitalized. (Deutsche Bank denied those media reports today but that didn't stop the shares from hitting a 30-year low. Problems persist.)

Europe On The Brink? When Bad = Bad - deutsche bank

Next up... Commerzbank.

Germany's second largest bank announced today that it would eliminate 9,000 jobs and suspend dividend payments in a revamped cost cutting effort. (Note: This is take 2 for Commerzbank, which has already cut full-year profit targets and eliminated 5,200 jobs.)

Europe On The Brink? When Bad = Bad - commerzbank

Among our Macro team's top three 3Q16 Macro Themes (released in July) is #EuropeImploding.

the carnage continues