Even sniff of US default will trigger huge selloff: ETX Cap

Like most experts, Mark Priest of ETX Capital warns that European markets are likely to remain weak and under pressure till the US debt ceiling issue is resolved.

“Markets do not like uncertainty. The longer it drags on and the closer we get to the October 17 deadline day, this market is going to get more nervous,” he told CNBC-TV18 in an interview. Further, he cautioned that failure to reach a resolution on this issue will be pretty disastrous for global markets and one should brace for a massive selloff even if there is sniff of US default. Also Read: We are prepared for QE tapering, says Chidambaram Below is the edited transcript of Mark Priest’s interview with CNBC-TV18 Q: What is the mood now across the European markets? A: There is a bit of weakness. There is a concern that even though negotiations are going on in the US there is no settlement. We only have three days or so until the crucial deadline date. Markets do not like uncertainty and the longer it drags on and the closer we get to the deadline day, the more nervous is the market is going to get. Q: Do you think that the market is completely ignoring something which could be even bigger, for example, come October 17 there could be a sudden and almost unprecedented negative reaction on the equities if in case a positive outcome doesn’t come through on the debt ceiling? A: Over the weekend, everybody seems to be concerned that any default on US debt will be catastrophic globally. So, there is a great concern, all eyes are on the developments in the US. They will have to come up with some solution. Incase they don’t come up with a decision; it will be pretty disastrous for this market. There will be a massive selloff if there is a sniff of default in US. Q: As of now we have not seen any fund outflows from any of the global funds? A: I think people are still trading with their hearts but this will resolve itself. We have seen in the last couple of days, at the end of the last week how market will rally if a resolution comes about. Generally, people believe that it will resolve itself. It is just the uncertainty at the moment.