Markets In Risk On Mode Following Greek Non-Default And Denials Of Greek Referendum And Siemens SocGen Bank Run

Anyone who may have gone to bed last night assuming some version of long-termist reality would finally creep back into the market following rumblings of all out trade war between China and Europe will be sorely disappointed as instead stocks are once again focused on the purely superficial, such as that Greece did not go bankrupt last night and did make its €770 million payment this time, although what will happen in the future depends entirely on the Troica. As for the Troica, their animosity toward Greece will hopefully be moderated after Greece denied a report from Kathimerini, which as we expected had about zero percent chance of any credibility to it, that it would go ahead with a eurozone participation referendum, which obviously would have ended the Euro as the majority of people in Greece (and all of Europe) are well over the monetary experiment. Lastly, Siemens scrambled overnight to clarify the FT news that it had pulled money from a French bank, SocGen as it turns out, but says that this happened back in July, and had nothing to do with the current troubles at the French bank. Lastly, two bond auctions by Spain and Greece came at around previous result, and hence much better than the collapse expected further adding to the short covering pressure.

From Reuters on the anticipated Greece referendum denial:

Greece denied a report on Tuesday that it was considering holding a referendum on the country's membership in the euro zone.


Kathimerini daily wrote on Tuesday, citing unnamed sources, that Prime Minister George Papandreou was considering calling for a referendum on whether Greece should continue to tackle its debt crisis within the euro zone or by exiting the single currency.


The government has long said it was planning a referendum on political reforms but has repeatedly denied that it would concern the country's euro membership.


Asked if the referendum would be about staying in the euro zone, deputy government spokesman Angelos Tolkas said: "No. We haven't discussed such an issue, definitely not."


He said the government had put to parliament on Monday a bill aimed at allowing the country to hold referenda but without specifying any issue.


"Yesterday we tabled a bill about referenda ... but we have not discussed anything more than holding a referendum."

Next, on Siemens' denial it is concerned about SocGen:

German engineering group Siemens (SIEGn.DE) withdrew deposits from Societe Generale in July because of the funds' underperformance and not because of fears over the French bank's financial health, a Paris-based source said on Tuesday.


The Paris-based source told Reuters the deposits, while at SocGen, had been placed in an investment vehicle but was unable to say what the amount was.


"Siemens withdrew funds (from Societe Generale) before the publication of the outcome of the stress tests (in July)," the source said. "The withdrawal was for reasons related to performance and not to French bank issues."


Fears over a Greek default and the spread of the euro zone debt crisis have roiled European bank shares in recent months. French banks, perceived as relatively undercapitalised and dependent on wholesale short-term funding, have been hit hard.


SocGen declined to comment. Siemens said the FT report was "factually incorrect".


SocGen shares were down 3.1 percent at 0907 GMT, the biggest faller among European banking stocks . Larger rival BNP Paribas was down 2.5 percent, and smaller peer Credit Agricole was up 0.2 percent.

And lastly, the French and Italian bond auctions:

Spain announced it raised €4.46 billion in 12-18 month bonds, with a target raise of €3.5-4.5 billion.

  • 12-mo auc avg yld 3.591% vs 3.335%, bid/cover 2.78 vs 2.14
  • 18-mo auc avg yld 3.807% vs 3.592%, bid/cover 2.74 vs 3.23

Greece announced €1.625 billion 3M Bill auction results, in line with prior:

  • 3-mo auc avg yld 4.56% vs 4.50%, bid/cover 2.84 vs 2.95

And this is why everyone is ignoring the far more important and bigger Chinese news overnight... At least for the next few hours as the short covering relief rally fades away.


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