Expect global mkts rally to continue: JP Morgan Chase Bank

The European leaders on Friday agreed to take emergency action to bring down Italy and Spain's spiraling borrowing costs this lead to rally in the global equity markets and commodities.

In an interview to CNBC-TV18 James Glassman, senior economist, JPMorgan Chase Bank said, the step announced at the EU Summit is complicated one because it requires political solutions than anything else. However, he added that one should now be sure that the leaders in Europe are committed to continued economic integration and may be the worst has passed for the region. Meanwhile, he expects the rally in global markets to continue. “In my mind there is pretty likely that the global recovery continues, may be at a healthier pace and a little more moderate pace, so that’s all fairly good prescription for equities,” he elaborated. Below is the edited transcript of Glassman’s interview with CNBC-TV18. Also watch the accompanying video. Q: There has been a lot that’s come out of the EU summit. Do you think that the worst is over for the eurozone or do you think that the fundamental problems still remain unresolved? A: We are seeing movement in the direction that you expected to see. There have been commitments to staying on path of developing more institutions, banking unions, fiscal unions that they need. So, there will be disappointments I am sure because it’s a complicated process to pull this together because this has really more political solutions than anything. But I think by now we should be getting a pretty clear message that the leadership at least in the region is quite committed to continued economic integration. I don’t think there is much doubt about that. It may be that the worst has passed. It doesn’t hurt that in the US we are seeing some of the uncertainty clear over the health care and the future course of health care at least in the near term, so that is helping I think. Q: What then happens to the equity markets? Does the rally continue? What are you hearing about the investors? Are they ready to deploy more cash into the equity markets across the globe? A: Yes I don’t see why not because frankly if you believe that the Europe slowdown has hurt the Asian region and things have slowed down. But personally I think the slowdown in Asia is probably a healthy thing for the region. So from my point of view investors should be seeing lots of positives here. It makes a lot of sense to me that we refocus on the growth prospects. Yes, there are challenges in Europe and it’s going to take time and the region is still stalled and the US news has been a little slower. But in my mind there is pretty likely that the global recovery continues, may be at a healthier pace and a little more moderate pace, so that’s all fairly good prescription for equities. Q: We have seen a strong rally in equities as well as commodities. Brent crude rallied around 7% in one trading session. What sort of levels would you possibly be working with on that? A: For me I have been thinking a level around USD 75-85 makes sense. So yes we have had some rally here but it has been of fair amount of where it was. If the global economy does not grow as quickly as it had done, I think then commodity prices probably will not be as intense as they were.