Photo: Wikimedia Commons
Remember Societe Generale’s huge sell-off last week?It happened during the middle of last week, as fears in Europe hit new heights, and CDS began widening for even the core countries.
Well it looks as though it could all have been caused by a fictional series called the End of the Line for the Euro, first published in Le Monde, and perhaps re-reported as factual by British publication The Mail on Sunday.
Here’s a quick refresher:
Last week French bank shares plummeted on talks of their massive exposure to Greek debt. Financial stocks dragged down the CAC, and the French market regulator (AMF) moved to ban the short-selling of 11 financial stocks.
The rumours that started this sell-off have since been traced back to a report by The Mail on Sunday, which allegedly drew on Le Monde’s fictional series and published an article claiming that Europe’s largest banks were on the brink of disaster. Even the French economy minister discussed the alleged connection in an interview, and as reports about the connection grew, Le Monde defended itself in an editorial over the weekend (via The New York Times):
“The reality is that our fiction had nothing to do with this crazy rumour,” Mr. Izraelewicz wrote in the Sunday-Monday edition of Le Monde. “The paradox is that this case has come to illustrate something that our series denounced: the unacceptable role played by rumours in determining the fate of nations and businesses.”
The 12-part series published by Le Monde takes place in 2012 when German courts declare any participation in the euro unconstitutional. To complicate matters, even though the series was identified as being fictional, it referenced national leaders and big banks.
In the article Société Générale did better than other French banks but SocGen wrote a letter of complaint to Le Monde anyway, because the article claimed that it needed an expensive bailout.
While an anonymous source at The Mail on Sunday denied drawing on Le Monde for its article, the publication for its part published an apology, which Societe Generale posted on its website:
“In an article that appeared in the print edition and online version of the Mail on Sunday on 7 August 2011, it was suggested that according to Mail on Sunday sources, Société Générale, one of Europe’s largest banks, was in a ‘perilous’ state and possibly on the ‘brink of disaster’.
We now accept that this was not true and we unreservedly apologise to Société Générale for any embarrassment caused.”
One other unrelated thing: A story that appeared Wednesday in FT Alphaville cited an incorrect report about SocGen dumping gold futures at below-market prices. That didn’t help.
For now, French regulator A.M.F. is responding to a request by Société Générale and is looking into the rumours that sparked the sell-off that saw the bank’s shares plummet 15% last week.