CORRECTED: Confusion Reigns as Greece Scrambles, New Premium Trades

Aussie Retail Sales are due Thursday not this evening as stated in prev IMT. Disarray in Greek politics and a soft ISM report sparked a second day of risk aversion. USD and JPY were the top performers while AUD and CAD lagged. A 2nd edition of today's Intermarket Insights is added, including gold & AUDNZD.

The situation in Greece is confused and fluid. Yesterdays surprise referendum call has generated an enormous backlash among Greek politicians and the broader euro area. Calls for the resignation of PM Papadreou are growing louder within his own party amidst reports of defections in his razor-thin majority government. The euro rebounded midway through the session on a report that a Socialist Party member said the referendum idea is basically dead. At the end of the session, however, a Greek government spokesman said the referendum will go ahead.

A backlash is growing in the rest of Europe. Sarkozy has called a snap meeting with Papandreou and told reporters the bailout deal is the only way to fix Greece. The referendum appears to be a shock to other European leaders but all indications are that Europe remains committed to the plan announced last week.

The hit to sentiment was partly buffered by the IMF, who said it may introduce a six-month credit line for countries hit with a shock.

Money rushed into Germany with 10-year yields there falling a record 26 basis points and spreads across the periphery blowing out. Italian 10-year notes regained 6.0% after having never traded above that level until Monday.

Risk aversion was exacerbated by economic data and stunning revelations from MF Global. The ISM manufacturing index fell to 50.8 from 51.6. Expectations were for a rise to 52.3. Wall Streets reputation took another hit after MF Global revealed it used client funds for its own trading. The practice is illegal and will renew calls for regulation and oversight.

The S&P 500 fell 2.8% to 1218. Gold fell $5 to $1720. Oil fell $1.81 to $91.38.

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Asia-Pacific Preview

At 4:30 GMT September Aussie building approvals are expected down 4.5% after an 11.4% rise in August. The market is growing more sensitive to Australian economic data due to the uncertain path of interest rates.

An hour later, BOJ member Sayuri speaks in Yamanshi, he will hold a press conference at 0500.