Greece may get breathing room; ECB action expected: CCAM

Over the next few days, the European markets will be in focus as key policymaker meetings are scheduled to take place. Mark Konyn of CCAM believes Greece is going to be allowed breathing room to meet its bailout requirements. Further, he also expects some action from the European Central Bank (ECB) and according to him, the general initiative on the bond buying program has allowed yields, particularly Spanish yields to pullback.

Here is the edited transcript of the interview on CNBC-TV18. Q: There are a lot of key European policymaker meetings which are lined up in these coming few days. What's your expectation of what will come out with respect to resolution about Greece? Will they get that extra time to meet its budget cuts etc.?
A: Certainly the strategy all the way has been to try and delay the inevitable and allow more breathing room for Greece to try and meet those bailout requirements. I don't think we are going to see anything too dramatic from what we have seen in the past.
We have got Chancellor Merkel and President Hollande meeting tomorrow in Berlin. They will be looking to find enough room for Greece to meet the main elements of the bailout. But, providing some concessions will exactly help it achieves those outcomes. Q: We have got this to and fro on what the ECB might do with respect to yield levels and therefore, purchase of peripheral country bonds. Do you think that the European markets could be poised for a big disappointment if that kind of bond buying didn't come?
A: Certainly, there has been a build up in expectation that there will be action taken. We have seen selectively and incrementally, senior government officials slowly giving their agreement to their general initiative of the bond buying program.
That has allowed yields, particularly Spanish yields across the continent to pullback somewhat and is taking some of the heat off the issue. In the meantime, as we know, equity markets have had a pretty good run despite the fact that we are seeing weakening margins across Europe. Q: We have seen a very good rally until now across the global equity markets and this is despite no stimulus measure that has come through in the last month or two and moderate economic data. Do you think that the rally can continue? We can break past our multi-year highs despite seeing no action from perhaps an ECB with respect to bond buying or any significant development. Do you see momentum in the market which is in-built despite any external trigger which can help the rally to continue?
A: The rally has had some legs since July as we know, not on the back of volumes that we saw earlier in the year, but during the first quarter we saw similar investor improvement in terms of sentiment. We did see larger volumes. There was still some leverage in the market and I would suggest that this shortage of high quality collateral is holding back volumes slightly as we have moved through the summer.
Question is whether it's sustainable? Take the Indian market for example, whether earnings are really going to follow the lead that the market is showing us in terms of improvement, that’s not likely. I think we are seeing a fairly mixed bag in terms of the earnings picture.
We have seen overall earnings growth at about 10%. We are still seeing over half companies not meet expectations and depending on which sector you are looking at we are getting a mixed picture. It's unlikely that we are going to see a sustained position in terms of this rally. However, in the absence of any stimulus we are not looking at a significant down leg from here unless we see disturbances at a global macro level.