See liquidity improving in European markets: UniCredit

Marco Valli, UniCredit expects continues cash inflow by FIIs into the eurozone markets. "When it comes to peripheral markets we see some risk appetite," he said. As a result, he sees liquidity  improving in these markets.

Below is the verbatim transcript of his interview to CNBC-TV18 Q: It is a very quite start in the European markets. Are the markets looking a bit tired? How would you call them from hereon? A: It is a very important week. Particularly in the eurozone we had some important data, this is why the markets are pretty quite. In the final part of the week we will have important survey data, particularly the PMIs in the euro zone and the Germany. We think that markets will be focused on these two data. After the latest weak data, which also prompted the ECB (European Central Bank) to cut interest rates the market is really trying to understand whether the euro zone is starting the recession of the recent moderate upward trend going on. We expect some modest improvement in the PMI Q: What is the sense the market is getting in terms of what the Bank of England (BoE) may do next? A: We think the central bank will remain on order. We do not see much scope for an expansion of the (Quantitative easing) QE program. We think that they will decide to remain on hold. The latest inflation also showed likely stronger GDP growth. We do not really see them stepping up the phase of QE for the time being, although obviously there is a big uncertainty on what will happen after Carney takes over. However, we remain convinced that an expansion of the QE program is not in the cards. Q: We have seen an improvement in the cash inflows into the Indian markets by FIIs. How has it been for the European markets? A: We continue to see inflow in the euro zone markets. Particularly when it comes to peripheral markets, all the indications that we have is that we see some risk appetite. Therefore we see improving liquidity in these markets. When it comes to euro zone government bond markets as the liquidity situation has improved compared to a few months ago. If you look at the data you can see that there is a fundamental improvement in euro zone. This is a good sign that suggests that the ECB’s (Outright Monetary Transactions) OMP has delivered some of the wanted result. We still had not seen the beginning of migration in financial markets in liquidity conditions spilling over through the real economy. However, I think it is just a matter of time.