EMs should be beneficiaries of ECB rate cut: Nick Parsons

Below is the verbatim transcript of Nick Parsons' interview with Sumaira Abidi and Reema Tendulkar on CNBC-TV18.

Sumaira: What is your take on triple rate cut by the European Central Bank (ECB) and do you think that Asia or the emerging market could actually be the unintended beneficiaries of this?

A: I was exceptionally happy with the ECB’s moves because we forecasted. We were one of the few banks worldwide who called for a 10 bps cut in all the main rates yesterday, so we were extremely pleased. What does it mean for risk assets? I think its supportive for credit market, it is supportive for assets more generally and although its giving quite a big boost to the US dollar, we can see that through the performance of the dollar index spot (DXY), the EM is able to be resilient in the face of US dollar and it is helpful for risk assets more generally. How long that period of this being supportive, remains to be seen because at some point we will be looking forward to the FOMC’s next meeting on September 17, but for the moment it is supportive and would be beneficiary of it.

Reema: Do you think all the good news is priced in, into the US market. Yesterday they didn’t react to the ECB rate cut; they come off from the high point of the day. So, even if today we get jobs data, which is largely inline with street expectations – 225,000 around that figure, what kind of a reaction can we expect from the US markets?

A: I think US is looking more fully priced than any other market but we shouldn’t over analyze it but nonetheless the three main indices - the Dow, the S&P and the Nasdaq, its noticeable that they haven’t joined in global rally, they are all down on the month to date and Futures market at the European open are indicating a slightly lower start for them when US market do open this afternoon.

I think the US is more fully valued than any other and the thing to be careful of, to be wary of - when the payroll report is released this evening at India time – look at the earnings number because the FOMC and Janet Yellen could cope with the 220 or 230 payroll number. I think they could cope with 6.1 percent unemployment rate, in fact hoping no need to change their policy stance but if were to see an upturn in wages, its not generally expected, we are looking at 2 or 2.1 but if there are upside surprise in wages then that would make investors get a bit more nervous ahead of September 17 meeting. I think it is an important day ahead of those and the other thing I would point out is to see that this week the first time in several months, we have seen US interest rates moving in a different direction to those in the rest of the world. So, American asset markets, equity market in the US have to cope with higher domestic rates in a way which other market elsewhere do not have to do.

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