Hans Goetti of Banque Internationale believes the ECB wants to see more economic data coming out of Europe and then take a decision on rates.
Hans Goetti of Banque Internationale a Luxembourg says the positive cue for European markets would be the prospect of the European Central Bank (ECB) pursuing an easier monetary policy. Though the ECB has indicated that it won't happen anytime soon, but Goetti sees the central bank easing rates later this year.
He feels European market still offers very good value.
He believes the ECB wants to see more economic data coming out of the region and then take a decision. ECB, according to him, sees Europe closer to deflation than inflation.
Below is the verbatim transcript of Hans Goetti's interview with Reema Tendulkar and Ekta Batra on CNBC-TV18.
Reema: Are you surprised with the European market opening? US markets had a good close, they were higher by about half a percent but that is not translated into European markets this morning, so what is keeping it lower and how is the day expected to shape up for Europe?
A: The positive case for Europe - it will be to a large extent supported by the prospects of the ECB pursuing an easy way of monetary policy and they have stated that they are not ready or it is not going to happen anytime soon and maybe that is a bit of a disappointment, there is obviously uncertainty about Ukraine and so on. So I think it is some short-term fact that play a role. We still think that Europe offers very good value as we see ECB later this year loosening up on their monetary policy.
Ekta: So the inflation data that came out yesterday is not going to have any impact on the ECB loosening up policy according to you?
A: That is right. I think they are not ready yet to commit to easier monetary policy. I think they want to see more data. I think they still think that Europe is closer to deflation than inflation but they are not willing to do anything right now and of course we have recovery that is starting to take also they probably would like to see more data.
Reema: If the FOMC continues with its stance and we see the fourth cut in monthly bond purchases, will the markets react or is completely priced in?
A: What you have there is you have a reduction in the deficit in United States and the issuance is way down. At the same time you have commercial banks still buying treasury bonds, everybody is out for yield, there is still this chase for yield, no matter how low it is even if real rates are practically at zero. So that supports the treasury bond market quite well contrary to expectations at the beginning of the year. We were afraid of Fed tapering and less buying but also the issuance is much less because the fiscal situation in the US is improving.
Stay tuned for more…
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