A rally right now runs risk of being short lived: Parker

Post the EU Leaders Summit, European markets are flat as investor sentiment remains confused. According to Robert Parker of Credit Suisse Asset Management, investors are going to wait until Monday to assess the final statements coming out of the Summit.

The recapitalization of European banks continues to be a pain for markets. Another sore point is the extent at which the European Central Bank will step in and purchase European sovereign bonds.

Below is an edited transcript. Watch the accompanying video for more.

Q: Which way is the wind blowing in Europe now? How is the initial reaction to the first statements which have come in from Sarkozy and Merkel?

A: The answer to your question is investor confusion. So far in European trading we have seen very significant minute to minute volatility in European equity markets, initially down now rebounding. Investors are going to wait until Monday to assess the final statements coming out of the EU Summit.

What we have seen so far, which is constructive is an agreement of a fiscal pack for the 17 Eurozone countries whereby they will limit their budget deficits to 3% of GDP, whereby they will limit their structural deficits to 0.5% of GDP and then the third component that has been announced is this the agreement that 200 billion euro will be routed via the IMF into the European support mechanism which will be established in the middle of next year. So, all of that is positive.

No statements have been made about what to do to recapitalize European banks and the credit rating agencies have downgraded a further number of European Banks which is still problematic. I would highlight the report that came out yesterday that came out from European Banking Authority saying that approximately 110 billion of additional capital is required for European banks, so that is a problem.

The other problem is what we still do not know to what extent the ECB will intervene as a purchaser of European sovereign bonds. Statements from Draghi yesterday saying - it would be very limited and that is why the markets sold off quite sharply yesterday. If one cuts through all of this, there are some positives on the fiscal front.

Investors will remain very impatient to see to what extent fiscal plans are implemented. They will be impatient over the lack of details on the European support mechanism and they remain concerned about the banks. I don