Abu Dhabi Investment Authority backs out of $7.5 billion commitment to Citigroup - will it matter?

Interestingly, the Citigroup share price is reported to have risen in European (pre-US market open) trade as this news was coming out. We'll have to see if the banking index can do anything other than provide a sell-able rally, based on the post here last night about the banking sector going into its wave C down to retest the wave A lows of March. Anyway, here's the news -

By Dakin Campbell and Andrew MacAskill

Dec. 16 (Bloomberg) -- The Abu Dhabi Investment Authority is trying to abort an agreement to buy $7.5 billion of Citigroup Inc. stock at eight times today's price, saying the bank misled it about the investment.

ADIA, as the sovereign fund is known, filed an arbitration claim alleging "fraudulent misrepresentations," and is seeking more than $4 billion in damages if the deal is upheld, Citigroup said in a statement yesterday, adding that the claims have no merit. ADIA invested in November 2007, getting equity units that can be swapped into common stock at $31.83 to $37.24 a share from 2010. The shares closed at $3.56 in New York yesterday.

Here's the link to the full story at Bloomberg: http://mobile.bloomberg.com/apps/news?pid=2065100&sid=aZeBnLn1f4Ic.

This could turn out to be a "buy the news" bounce, but I don't see it lasting. The C wave down idea seems more likely, meaning a downtrend for the banking index in which rallies should be sold. That doesn't mean all banks will wither. Some banks may buck the trend and do well. But the outlook for the sector isn't good, as the technicals show. The March lows are in the sights for where the index will make its next major test.