Euro zone still catalyst for global markets: Justin Harper

"We are still looking at Europe for the second half year as the main catalyst per se. It will be all about the euro zone as trading partner and market sentiment driver," he added.

Below is the edited transcript of Harper’s interview with CNBC-TV18.

Q: The GDP figures have come out and a country like Germany has posted an expansion, but southern European countries like Spain, Italy and Portugal still remain an area of concern. Do you suppose now because of the way the German growth figures have come out, is there a fear now that perhaps they take their foot off the pedal in terms of the urgency with which they have been dealing with this crisis?

A: I think so. We looked at the euro zone data yesterday and see a big difference in what is happening in stronger economies like Germany, France and any other southern countries. They are likely to drag down the stronger economies.

Some countries like Finland are already introducing very tough austerity measures, which is seeing their gross domestic product (GDP) growth come down quite a bit. They are saying that we are doing it so everybody else should be doing as well.

There will be more pressure on the life of Spain and Italy to make tougher cuts and to get less sympathy from the ECB. Germany we know is very reluctant to keep from paying out.

Yesterday’s data was sort of interesting to see how economies of the euro zone are struggling to this crisis. But, this is possibly the calm before the storm that data will get; it will get even worse going into the next quarter’s figures as well.

Q: Even in Asia the data hasn’t been entirely supportive, whether it is data that is coming out of China or even the contraction that we have seen the Japanese economy vis-à-vis what we are seeing in the US where despite what is happening with growth but atleast in terms of employment, retail sales, things are picking up, how do you see things then moving outside of Europe?

A: We are still looking at Europe for the second half year as the main catalyst per se. That is the biggest fear factor within the markets. Coming in second will possibly be China’s slowdown and then the US economy. But in US they have a more of a slope and US economy is still continuing to grow.

We are seeing that with yesterday with retail sales, China economy is still growing at 7.5-7.8% with a view to extra stimulus being readied by the PBOC. The eurozone is the one where there is more danger because there are still so many unknowns.

As we go forward, in the second half of the year, it will still be the critical factor regardless of what is happening with China and US. It will be all about the euro zone as trading partner and market sentiment driver.