Italy Is Driving the World Crazy

The big macro can cause big moves in the market. What does today's headline macro news mean for your portfolio?

What's happening: Stocks around the world sank and Italian bond yields shot up after Prime Minister Silvio Berlusconi offered to resign after failing to receive majority support in a parliamentary ballot.

In plain English, please: The fear all along has been that the debt concerns that forced Greece, Ireland, and Portugal to seek bailouts would move to larger countries like Italy and Spain, which would be much tougher for the region to backstop. With the Italian government teetering, bond investors are getting skittish, which pushed up the country's bond yields to over 7% -- the level that drove the other Eurozone countries to seek aid.

The further concern for investors is that if Berlusconi resigns and the country moves on to new elections, the world could be left with significant uncertainty for some time. Worse, bond investors would also be left with uncertainty, and they may continue to flee.

Stocks to watch: There's obvious reason for investors to focus in on companies based in Italy such as Eni (NYSE: E) and Telecom Italia (NYSE: TI). Likewise, the major banks of the continent -- including HSBC (NYSE: HBC), UBS (NYSE: UBS), Banco Bilbao (Nasdaq: BBVA), and Barclays (NYSE: BCS) -- face significant risk if the situation in Italy continues to deteriorate. But no investor should feel comfortable ignoring this as the outcome will have significant consequences for the global economy.

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• Add Banco Bilbao Vizcaya Argentaria to My Watchlist.