The relief rally after Sunday’s election results showed that Greece isn’t about to leave the euro tomorrow had pretty much petered out by 11 a.m. in New York. The Standard & Poor’s 500, which had climbed above Friday’s close by 10:52 a.m. had given back all its gains to move back under the Friday close by 11:04 a.m.
Think of it this way. Right now nobody is long Greece. Nobody has been going long Greece in the last few days. And I think that goes for Spain and Italy and France and Ireland too. But bears that have been short Greece and the other parts (or all) of the EuroZone aren’t piling on more bets on a disastrous Greek vote on Sunday either. Instead their taking profits, which drives up prices of financial assets in the short run
The Greek ban on election polls in the two weeks before the June 17 election means that financial markets have been left in the dark about which party is leading in the Sunday vote that could well determine whether or not Greece leaves the EuroZone. So this morning’s explosive resignation of one of the leading leftwing candidates for parliament is a loud statement echoing in space hungry for news. Is it enough to turn the election against Syriza and keep Greece in the euro?
The headlines this morning say that Spain will request aid for its troubled banks in a conference call with European finance ministers this Saturday. But it’s extremely unlikely to be an official request for assistance with an actual figure attached. This weekend’s exercise is best thought of as a pre-request-request.
European leaders know that as big a deal as the June 17 Greek election is, the really tough test will come when a new Greek government will face having to cut another 10 to 15 billion euros from the Greek budget before the end of the June in order to keep to the bailout deal.
How will Greek’s vote on June 17? It’s not a foregone conclusion that they’ll back the parties that are calling for the country to repudiate/renegotiate the bailout deal (which might well mean that Greece leaves the euro.) Two recent polls give contradictory results.
The release of 18 billion euros ($23 billion) by the European Union to Greek banks today has at least postponed what was starting to look like a run on Greek banks
I can see the shape of what I called a “solution event” in this morning’s “Buy on the Dip” post taking shape around the May 14 meeting of European Union ministers and the May 15 meeting in Berlin between German Chancellor Angela Merkel and newly sworn-in French President Francois Hollande.
