In an interview with CNBC-TV18, Michael Every of Rabobank said that the markets did not like Draghi‘s comments and is starting to lose confidence in Central Banks.
After Mario Draghi signaled that further rate cuts are unlikely for an extended period, major global indices fell in yesterday’s trading session even though the European Central Bank did provide stimulus to the market on Thursday.
In an interview with CNBC-TV18, Michael Every of Rabobank said that the markets did not like Draghi’s comments and is starting to lose confidence in Central Banks.
He further said that such sentiment are worrying as there is nothing else on the horizon that can help the market.
Below is the verbatim transcript of Michael Every's interview with Reema Tendulkar and Nigel D'Souza on CNBC-TV18.
Reema: European Central Bank (ECB) met street expectations but Mario Draghi has dampened the outlook for future interest rates cuts and that has not gone down too well with the market. What is your reading now of how the global equities will behave based on what has come out of the ECB?
A: I think it has been from the initial reaction not very well because the crazy situation we are in is that the ECB exceeded what we thought they were going to do -- even more negative, which is supposedly good. And the increased QE at the same time -- now even talking about buying corporate bonds, which is quite incredible extension of the original exercise, the buy only government bond. Yes, the market didn’t like it. I think it is underlying the fact that the markets are starting to lose confidence in Central Banks being able to get us out of the situation that we are still in. Of course that is very worrying. That is true because we don’t have anything else on the horizon who is going to help us.
Nigel: Is this a money bubble in the making? Also, do you think that in fact the likelihood of Britain exiting the Euro zone has even gone higher?
A: That is very hard to call. There are number of different opinion polls and you can look at them just as I can. They appear to be showing it is a fairly tight context and I think on that front, we will have to wait and see. All I can say is if we get a negative headline about Europe or anything along those lines in the run up to the vote, it could potentially be that the markets won't like but certainly, we are going to have uncertainty in the background for months going forward now and if you combine that with the fact that Central Banks are no longer acting like the parent who steps in and saves the children whenever anything goes wrong, it is not very friendly for equities even if we have managed to see an incredible short squeeze in the past few weeks.
Reema: As you said markets don’t like uncertainty, so are we headed lower? Is that the call now on global equities that we should be still selling into the bounce that we have seen?
A: I think we should have been selling all along but then I would have lost money over the past few weeks because I never understand how people can manage to buy into these obvious short squeezes but then that is why I am not a millionaire living on a yacht somewhere.
Fundamentally, I still say that we should be selling absolutely that doesn’t mean of course that the market cannot be irrational, a little bit longer and manage to find some completely ridiculous reason to go higher in the near-term.
Nigel: The emerging markets run close to around 7-10 percent in this month. They have done their run, India, Brazil, Russia and also where would India come in that pecking order if you are looking at the emerging markets?
A: Yes, absolutely. We have seen a very good run from a number of key emerging markets and as a hope I may just very clear, if it were me and at particular position, I would be taking some of the money off the table, I would be making some of that profit in and I will be thinking now is the time to maybe take a step back and reassess.