Today's Major Market Move: Lithuanian Stock Market Declines 8.2% for the Day

8% single day declines in equity markets are pretty rare but unfortunately for Lithuania, they experienced one on Thursday. As a point of reference, the maximum decline of the Dow on the day of the 'Flash Crash' was 9% and the market ended up closing the day down 'only' 5%. The Lithuanian stock market was by far the biggest decliner of the day:

Click here to go to the live table.

This appears to be the reason for the sell-off (from reuters):

Lithuania unexpectedly took control of Snoras -- the country's fifth largest bank by assets and the third by deposits -- at the request of the central bank, which said it found a 1 billion litas ($391.7 million) hole in the bank's assets, and prosecutors said they opened a probe.

As to be expected, Lithuanian authorities are playing down this event, attempting to calm the markets with statements like:

• "Lithuania probably won't need to inject public money"
• "There is absolutely no panic"
• "Only 2 percent of deposits were withdrawn on Thursday."
• "Snoras takeover was no threat to the banking system because its total exposure to interbank lending was less than 23 million euros."

All of those statements are essentially variations of "this is contained" but as we've seen time and time again, there is rarely one cockroach. The stock market is approaching this event with a "sell first ask questions later" mind set. I doubt this will have significant reverberations out side of the Baltics, but I wouldn't surprised to see after shocks within Lithuania itself as well as in Estonia and Latvia. 

I was just about to write about how the response in the currency markets was much more muted and that the Lithuanian Litas barely moved on Thursday. Then I thought to myself "hmmm, I wonder if there's a peg?" Sure enough, the Litas is pegged to the Euro. I wonder how much central bank firepower it took on Thursday to maintain it. 

The other Baltic equity markets had very little reaction on Thursday. For the year, Latvia has held up very well, down only 3.8%. Estonia has had more of a struggle with its stock market down over 25%.

Here's the chart of the 3 equity markets in terms of % change:

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