Greeks stick their heads in sand, investors run for cover

Greeks stick their heads in sand, investors run for cover

That was enough to bring on a wave of risk aversion as investors scurried for cover a second consecutive day. A slip in China’s purchasing managers’ index (PMI) and the bankruptcy filing of MF Global Holding Ltd added to their woes. The futures broker made a wrong bet on European sovereign debt and is the first casualty of the current crisis.

Asia was battered and Europe is trading weak. In India, that was enough for the market to shrug off the better-than-expected purchasing managers’ index (PMI story). The Nifty slipped 69 points, or 1.3% to 5,258. The Sensex too shed 224 points, or 1.3% to 17,480.

A no from Greece will derail the developments at Brussels last week. Then, Euro zone leaders and the International Monetary Fund struck a deal to garner around 130 billion euros to bail out Athens from the huge debt and asked bondholders to take a 50% haircut.

If Greece rejects the deal, there are concerns that Italy would also follow suit, said analysts.

“What is scarier is what will happen to Italian bonds. And it is no more a surprise that even Italian debt is too increasing fast. This coupled with bankruptcy of MF Global has also sent alarm signals across the world," said Milan Bavishi, Head of Research at Inventure Growth and Securities in an emailed statement.

Now, all eyes are on the G-20 summit which will begin in France on Thursday. Investors will closely watch if the European leaders are able to convince China and other developing nations to back European Financial Stability Fund.

Still, in all probability, markets overreacted to the rescue package announcement last week. But then you knew it already, didn’t you?

Also Read Mint analysys onHave the markets over-reacted to the Euro-zone deal?-