ECB may not cut rates on Sept 6: CCAM

The global markets are keenly watching the European Central Bank (ECB) meet on September 6.

In an interview to CNBC-TV18, Mark Konyn, CCAM says the markets are expecting a rate cut. "It may disappoint because there are a couple of challenges in the German Court. That may cause the ECB to hold off at this juncture," he adds.

Also read: ECB bond-buying would not breach rules, says Draghi

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Reema Tendulkar.

Q: The big trigger now everyone is watching off for will be the ECB. So, ahead of that, are you expecting markets to just remain on pause and sideways?

A: Certainly, investors are focused on that meeting. Ahead of that, we have seen downgrade of eurozone debt. We have got Germany, Austria, Belgium and Spain coming to the market, ahead of the ECB meeting, looking to raise about 20 billion euro in government debt. So, not just ECB’s meeting is in focus, but I think there are number of factors across the continent that will drive sentiment and will probably cause investors to be a little bit hesitant before they will see some visibility on these issues.

Q: Is there a possibility that the ECB meeting might disappoint seriously? Do you think that there is a risk of things getting too bad, if anything by way of bond purchases is not announced? Will it be announced at all on September 6?

A: I think the markets are also expecting a rate cut. It may disappoint because as we know there are a couple of challenges in the German Court. That may cause the ECB to hold off, at this juncture, in order to have a little bit of firepower thereafter. But certainly bond repurchases in some shape or form will likely go ahead. It could be challenged thereafter.

Q: Increasingly more and more provinces of Spain are joining the cue to ask for aid. Yesterday, we heard about Andalusia, just few days back it was Catalonia. What is the market expecting by way of resolution about the Spanish problem?

A: We certainly seem to have broken sort of threshold whereby a lot of these issues were kept hidden, until one of them surfaced. Now, each of the regions, one by one, consecutively are coming forward and asking for support. This obviously is worrying because I think the market was edging closer towards believing that Spain will be asking for a rescheduling and a bailout. That seem to happen more likely. So, not only we have got the banking problem in Spain, but we have also got public debt in terms of requiring support from the authorities across the Eurozone. At this stage, it looks very much like that the situation in Spain is deteriorating more quickly. That is a disappointment.