Emerging economies showing signs of recovery: Lloyds TSB

Trevor Williams, chief economist, Lloyds TSB, told CNBC-TV18 that the emerging economies are clearly showing signs of recovery. "The global markets are looking to put in money, but they are bit more selective about where they will put the money", he said.

Below is the verbatim transcript of his interview to CNBC-TV18 Q: What exactly is plaguing the European markets at this point in time? A: A numbers of things. In the UK the public sector debt figures which are expected to come out in the surplus. The question is how big the surplus is, whether it reduces the size of the current full year deficit to within what the chancellor was looking for, which is about USD 110-112 billion or whether its adjusted figure could be bigger than that which has implications for the Budget coming up in March.  Then Europe more generally is around the activity industry, whether or not we are seeing signs of recovery in first quarter after a weak start to the year and after a bigger than expected drop in forth quarter gross domestic product (GDP) figures for range of European countries. It is a whole range of factors affecting the European economy at the moment. Q: Have the global markets entered into a risk off phase in your mind or are they just using these issues that you spoke about as a reason to take profits off the table from multi-year highs? A: I don't think that markets are binary that they just switch on and off in this way. Markets are much more nuanced. The emerging economies are clearly showing signs of recovery. Global markets are looking to put some money to work, which has previously been in some of the advanced economies assets. They may be getting a bit worried about some of the valuations in peripheral economies. Although Mario Draghi’s comments around that he will do whatever it takes to boost the euro, has meant that there has been in your phrase a risk on for peripheral assets. So, the yields have fallen and some of the core countries like Germany and France yields have come up somewhat. Some of those are turning around and there is a bit more of a concern about the peripheral economies. There are strikes taking place, elections taking place in Italy that may not go the way the markets wants them to. Those things are leading to a bit more caution. Mainly that’s what is called a risk off phase. There is liquidity around and this liquidity is beginning to look more bifurcated. I would call it, a bit more selective about where they are putting their money.