This week is critical for global markets: Societe Generale

The global markets have been subdued over the last couple of sessions. In an interview to CNBC-TV18, Benoit Anne of Societe Generale says this week is critical for global markets. "We will have to watch the outcome of both the US and Greece elections," he adds.

Also read: See 5-10% pullback in equity markets, says StanChart Bank Below is the edited transcript of his interview with CNBC-TV18's Reema Tendulkar and Gautam Broker. Q: What made the market nervous? The data from the US was looking pretty okay in terms of the payrolls, Europe too didn’t have a significant surprise in terms of the PMIs. What do you think is leading to this profit booking at the moment? A: There are very interesting developments. There is strong data, but the market overlooks it and is moving on to the global risk for global markets including the US elections. The US equity market ended on a negative note. This is not because of non-farm payroll, which was positive. But the forthcoming US elections points to an outcome that might be negative for US equities in the near term. Obama’s victory is huge short-term negative for risky assets. That’s a bit of fear on this outcome that triggers the move and that has repercussions for global emerging markets. At the opening, today, we are seeing sentiment turning a bit negative. Let’s not forget there is the Greece vote on Wednesday as well. That might reignite contagion fears in Euro zone. So, very much a heavy risk agenda for global markets at this point, hence the negative move. Q: So, in the event that Obama does win the US elections, what is likely to be the market impact? How much of a correction then would you give it, since the market fears that? Secondly, in the other event, that Romney wins, what is likely to be the market reaction then? A: It is short-term negative for global markets, if Obama wins and the opposite if his opponent wins. So, I am obviously talking about a short-term tactical response. But that warrants a cautious ahead of the event. Q: How much of a factor will be the Chinese change of guard which takes place this week? A: That also is very important on the agenda for global markets. But it will take a little more time for us to digest that and to analyse the repercussions. Right now, the immediate focus is really on the US election and Greece. Q: What happens in case the austerity and reform measures are not passed in Greece? Do you think that kind of a situation is possible? If it does not happen, do you think Troika aid does not come and we are back to square one on Greece? A: It would be pretty serious, from the standpoint of global markets, if the vote doesn’t go through. I think there would be a big problem there. That would probably lead to a return of risk aversion or contagion in Europe. Q: As of now, is it just a tactical risk aversion ahead of fears about what will happen with respect to Greece and cautiousness ahead of US elections and not so much as a structural risk aversion, something which will lead to significant downside? A: Right now, the time horizon is very short anyway. This week is critical for global markets. We will have to watch the outcome of both the US and Greece elections.