Best of rally over; mkts enter choppy phase: Justin Harper

After an eventful September, the global markets are now heading towards a phase of stability and choppiness, Justin Harper, head of research, IG told CNBC-TV18.

"As we move into Q4, there will be a calming down of markets. There will be lack of any sort of catalysts going forward," he added. According to him, the markets have seen their peak and the best of the rally is over. Meanwhile, Harper sees further rise in prices of commodities including gold and crude oil, so he wouldn’t sell commodities anytime soon.  Below is the edited transcript of Harper’s interview with CNBC-TV18. Q: Just give us a sense in terms of the next amount of cues that you will be watching out for in terms of significant triggers possibly for the US markets as well as the European markets? A: We are getting into a period of stability and possibly more of choppy markets given how eventful it has been in September. As we move into Q4, there will be a calming down of markets. There will be lack of any sort of catalysts going forward. We are expecting to see some sort of sideways trading. It is just for people to see what the effects of QE3 will be how the eurozone moves on from the bond buying and in Asia, China and Japan what they plan to do regarding further stimulus. It is sort of betting down what’s happened before and looking now what’s the next driving force. No one can say what that is at this stage. Q: Would you see significant downsides? It’s one thing for Draghi to promise that he is protecting the bottom and ensuring that he will do everything and also getting the mandate to buy bonds, but that gets triggered only if the political peace is in place which doesn’t appear to be. Is it that we are now coming to the hard political bargaining within every national boundary? We know from India’s experience itself that’s always very difficult to sell to a population. Is there a big downside? A: Definitely, there is more downside versus upside, because a lot of upsides have now come through to what the Fed have done, the ECB, PBOC and also Bank of Japan, central banks’ concerted effort has now gone. They have laid their cards on the table. We are now left with problems that haven’t been solved by those actions. There would be Spain going to the ECB for a bailout. There would be Greece still tethering with the fact that it might exit and the worries of a slowdown in China. We have still got a lot of negativity out there and that’s why we are seeing some of the markets take a little bit of cream off the top because of those downside fears. Q: Where do you cream off first? Which asset classes? Will it just cream off in Europe and maybe US market equities or all risk assets which means say the Asian equity markets, emerging market equities, emerging market currencies? A: You start with equities and look at the US and the fact that unemployment is still well above 8%. We are still waiting for QE3 to come through. I wouldn’t be selling out commodities anytime soon, because I still see further growth for gold, oil and other commodities. So equities first, commodities and then currencies depending on which pair you are looking at whether it’s US dollar against Yen. You got to look at it on a tier system. _PAGEBREAK_ Q: What is your view on the Chinese markets? We have seen it underperform quite significantly. How optimistic would you be with regards to maybe some amount of easing coming out of China, now that we have seen that sort of Mexican wave go through from BOJ and the ECB as well as the Fed? A: We had a People's Bank of China (PBOC) member talking about not hitting the bottom yet and recovery still way off, so that gives you a view on their thinking. It is just what will they do to try and calm the markets. We have seen a big spending spree regarding infrastructure spending. There is only so much that can be done regarding Required Reserve Ratios (RRR) and interest rates. They have got their hands tied a little bit and we will obviously have to wait and see. They are not likely to just follow the Fed and ECB just for the sake of it and it would be part of the gang of central bank’s policy easing. They are going to look at their own domestic situation and it is faltering. There are some problems there, but I don’t see there is any pressure on the PBOC to do anything anytime soon.  They will still monitor things and keep an eye on what the trade figures look like, what the domestic demand looks like and how the property market is looking as well. They have got their own issues they need to be considering before they make another move. Q: How exactly has Brent crude moved? We are down 4.5%, but we have recovered all the way from levels of USD 107 per barrel. What is driving Brent crude prices at this point in time much lower? Do you think that this is just an aberration? What would be a sustainable level according to you? A: The slide we saw in US and Brent crude caught a lot of people by surprise. No one could really understand. When you got this big tsunami of cash coming across from central banks the commodities should be first in line to benefit. Then we saw a big dip in crude and people wondered why and it slowly recovered and lost some. It’s really confounding a lot of traders as to why, but I still think the undertone is bullish on oil. People are expecting it to creep up after it had this sort of minute madness of sliding. Generally, the market looks good for energy, but at the moment we are seeing some choppiness there. No one can understand whether it’s US stockpiles coming out higher than expected, whether it’s some of the faltering manufacturing on the downside - it is difficult to decide, it’s been very volatile in the last week. Q: What are you long on at all or what will you be for the rest of the year? A: We are still looking at equities in Asia; there are still a lot of good dividend plays and good defensive stocks to be bought. In commodities we have gold; it’s an inflation hedge and is still a good asset class. Property could benefit from QE3. It’s just knowing when to buy on the dips is going to be key going forward.