Stay cautious; eyes on non-farm payroll: Benoit Anne

Even after the enthusiastic opening of European markets, Benoit Anne of Societe Generale advises investors to remain cautious.

It is a big week for the global markets. However, for Anne, the big event going ahead will be the non-farm payroll on Friday. He believes if the numbers will be good then the volatility will go down. Also read: EU confronts Washington over its spying on European allies Below is the verbatim transcript of his interview to CNBC-TV18 Q: It is a fairly enthusiastic opening for your markets on the first day of the Q3. What is going so right for a European investor? A: I would not call that the whole story. I think there are still quite a few risks to watch here. So, I am going to be still very cautious at this stage. It is big week for global markets. To me the main event for my set of global emerging market (EM) purchases is non-farm payroll on Friday. There the big focus has been on the Fed monetary policy and all those Fed speakers trying to clarify or guide the market. However, at the end of the day I think the data will provide the most powerful guidance. If we do get this from number that is going to push US treasuries yields higher and that is going to be viewed as an another round of risk-off signal for risky assets including EMs. Q: Are you all expecting good Purchasing Managers’ Index (PMI) numbers, is there a sense that the worst is over in the European recession and things are picking up? A: No, I would not jump to that conclusion just yet. I think the growth background continues to be challenging globally. Only the US right now shows signs of improvement, but I continue to be nervous about the real economy at this point. Q: Do you think that the sole driver for the European markets would be what takes place in the US in terms of economic data etc. or is there any certain amount of key data points from the European Union particularly, which you will be looking out for very keenly? A: We have to watch at everything at this stage, but to me the story out of the US is the Q1. Q: What are investors talking about in terms of commodities now or rather with regards to precious metals and Brent Crude in particular? A: I am not a commodity expert here. However, the main driver of this is the growth story as of China. So far the news has not been particularly good. So, from the standpoint of global growth expectations you still have a risk to watch there. Q: Basically, since you cannot rule out the possibility of a fairly decent nonfarm payroll number, if it does come out to be good, will there be another savage risk-off from EMs in the week after you think? Or will the response be more measured this time if the numbers were very good? A: The goods news is volatility will go down. I would say there is not going to be the violence of the price action, we have seen over the past few weeks. However, I will reaffirm the trend nonetheless and the trend will be towards a further correction.