Corrections in '10 to be more aggressive, violent: JPMorgan

Here is a verbatim transcript of the exclusive interview with Adrian Mowat on CNBC-TV18. Also watch the accompanying video.

Q: What is your sense of how global markets head into the end of the year because there has been a touch of the edginess around the dollar trade over the last week or so?
A: I am pretty positive going into the year-end. We are going to see ongoing newsflow for economics as well as earnings revision being quite favourable. We continue to believe that the G3 countries will remain with interest rates where they are today all the way through to 2010. So that is good environment to equities. Now with regards to the dollar, there is definitely a strong casual relationship between weak dollar, strong equities and strong commodities. There is very little evidence of a quasi-relationship and we do expect that at some point next year that the US economic data will surprise on the upside and the dollar would begin to appreciate at that point.

That may lead to some short-term weakness in equities but we would view that as a buying opportunity. It could also lead to a correction in commodity prices, which again would cause emerging market equities to fall but we think it would be a buying opportunity also.

Q: The one red flag that people are beginning to raise though is that while some equity markets have been making new highs, the dollar has not been making new lows. Would you expect the correction to hit even sooner than people expect?
A: There is too much emphasis being placed on a weak dollar explaining all moves in capital markets. I was noting some of the comments overnight with regards to how markets are traded and some of the comments were rather conflicting. They were talking about the dollar strengthening and therefore there was less appetite for the risk, yet the VIX Index fell.

People are spending too much time trying to make the dollar explain everything else. You could easily get an environment that was positive for equities, that was also positive for the dollar, if that was about a stronger US economy than current consensus.

But there is an important reference market that is still confirming good information and that is credit spreads continue to narrow and that seems to be consistent with equity market still doing pretty well.