European markets recover from opening weakness on rapidly changing Greek situation

European stock markets recovered from early weakness of 1% to trade higher by 10am as investors continued to react to the rapidly changing situation in Greece.

Financial markets had opened heavily lower following on from 2% falls in Asian trade after a pre-G20 meeting in Cannes between Greek PM George Papandreou, Angela Merkel and Nicoloas Sarkozy evolved the intended referendum from a vote on the EU bailout plans to a vote on Greece’s membership to the euro itself.

Moreover, calls to suspend all Greek aid until the result of the referendum, which is set to take place on December 4 or 5, though subject to change on a daily basis it seems, has also kept market sentiment fragile.

However, the markets started to find some support and recovered from their earlier woes on news that Mr Papandreou had called an emergency cabinet meeting amidst speculation that he was losing support from his own party and could call for a snap election, an election which could put any referendum to bed and may result in a new stronger coalition government being formed. Of course this is just mere speculation but at a time of intense rumour, investors are being forced to listen to any rumour or rhetoric out of the region to help them to second guess what may happen to the Greek government and its fiscal choices.

The seeming full opposition to Mr Papandreou’s referendum plans from his own finance minister Evangelos Venizelos, who publicly stated on Tuesday that he was not told about the referendum plans in advance of the announcement, has further weakened the PM’s position today.

The key point here is that the Greece situation is changing on an hourly basis and whilst investors await the output of the emergency cabinet meeting called by the Greek PM this morning, traders are refraining from much activity with the markets trading particularly choppy until they know any definitive actions.

The unpredictability of the Greece situation is forcing investors to stay on the sidelines.

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