Also read: 'Debt ceiling issue to sort soon; fears of US mkt fading'
Parsons view comes on a day when the US markets gained nearly 2 percent after the House of Republicans made a proposal to raise the debt ceiling or borrowing limit by six weeks if President Barack Obama agrees to negotiate on other budget issues.
Futhermore, Nick believes the emerging markets (EMs) have more room for upside in the near-to-medium term since he feels tapering by the US Federal Reserve will now happen only in March or June next year against the expectation of September this year.
Below is the edited transcript of Parsons' interview to CNBC-TV18.
Q: There seems to be some amount of positive thawing with regards to atleast the debt ceiling in the US. How much more of an upside do you see for maybe US equities and that percolating into European markets as well?
A: The near-term answer is very little upside. What we saw last night in the United States was talks about talks. The good news is atleast both sides are talking and it was the first time in 10 days of government shutdown that we have had any substantive talks.
However, the best that we might be able to hope for in the very near-term is a six-week extension to the debt ceiling which is not kicking the can terribly far and then we are going to get ongoing protracted negotiations about passing the Budget. So, a very large part of gains that we could have are already behind us and in the near-term, it is very, very limited.
Let's not forget that Monday is a holiday in the United States, it is the Columbus Day holiday. Markets there are going to be shut all day Monday. So, we are not going go get very much of a lead at all there. Hence, I think it is going to be a struggle to make much more progress in the near-term.
Q: Would you say that these talks will not be hugely market moving in a volatile sense? The markets would just watch how these talks progress. It will not have too much of a negative impact on markets hereon.
A: I think the impact will be progressively diminished because it is unthinkable that there will ultimately be a default on the US and the talks suggests that Republicans do not want to get the blame for a shutdown. So in a sense, the possibility of the very worst case scenario materialising has probably been reduced.
I am not so sure that the talks are enough to put US equities 2.5 percent higher. Had we not fallen for 11 out of the previous 14 days, I do not think we would have got that reaction. It really is about the prior positioning than the impact of the news itself.
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