Mkts to be nervous this week on debt ceiling woes: AMP Cap

Shane Oliver of AMP Capital expects global markets to remain nervous this week on the back of the unending deadlock on the US debt ceiling issue.  In an interview to CNBC-TV18 he said that the resumption of talks among the US senate officials is a positive, but he does not the US government shutdown ending before October 17 deadline.

Also Read: US default? Asian policymakers ready $6trn forex safety net Below is the edited transcript of Shane Oliver’s interview with CNBC-TV18 Q: Over the weekend one thought some kind of deal will be hammered out but a deal on the debt ceiling looks further away. Would the market get terribly nervous now going into October 17? A: It was good to see that last week they were starting to talk, communication lines were opening up. It is positive that the senate is engaged and we hope that there will be some compromise. I think that they will increase the debt ceiling, but the newsflow will remain bumpy. The problem is that the October 17 deadline is not really a deadline; it is the date. The date could pass without anything happening, but it is going to be a fairly nervous week for investments. Q: How damaging could it be for equities if there is an extension to this deadline? Does it prompt you to take money off the table from equity markets globally? A: It’s too late for that. We will be seeing a lot of short-term noise. We feel something similar regarding the fiscal cliff. So trying to trade that is a bit difficult because the market will takeoff on the positive and we got a test of that last week, where the positive news coming out Thursday night our time and then strong rally on Friday. So, it is very difficult to trade this unless one has a firm view. Q: Do you think emerging markets therefore get a better chance now with the shutdown and all those worries making US economy a little slower than earlier perceived. Do the flows into emerging markets probably continue till end of 2013? A: If the news regarding US is little bit negative then investors might start thinking that emerging markets is a better place to be. Against that, we do not want the news that the US will be too negative because that may start rising question marks about export demand coming out of America. Also, the issues regarding the emerging world, for example, the Indian industrial production figures were good, the economic news coming from the emerging world generally is still a bit mixed.