European stocks jumped the most in seven months on Friday as investors poured back into beaten-down markets as the week's volatility frenzy continued. Ideaglobal Managing Director Mike Gallagher says we will be risk-off for a while.

SHOWS: LONDON, ENGLAND, UK (OCTOBER 17, 2014) (REUTERS - ACCESS ALL)

1. IDEAGLOBAL, MANAGING DIRECTOR, MIKE GALLAGHER, SAYING:

JOURNALIST ASKING MIKE GALLAGHER: 'Clearly still risk off. When in your view will we be risk on again?'

GALLAGHER: 'I don't think for a little while that we'll see the risk-on mood. I think the market is undergoing a correction. We've got stretched in a number of markets and what we're seeing is healthy. However, some of the price movements that we've seen on an intraday basis, I think, have surprised people. So the meltdown in U.S. Treasury yields, the huge spike that we saw yesterday in Italian and Spanish bond yields. Now they haven't necessarily lasted but it leaves people quite nervous. I think it will take a little bit of time. I think the second thing is that the markets dramatically shifted its expectations on the Fed. It's thinking that we might see the Fed tightening late 2015 now and it's reduced the whole profile of rates. I think the message that we get from the Fed is likely to be somewhat less dovish than the market is thinking and I think that's going to be a headwind. Nevertheless, it is a correction because the decline in oil prices is beneficial to the world economy and does reduce inflation pressures so it does help the medium term picture into 2015.'

JOURNALIST: 'You mentioned some of the sovereign credit yields in Europe. How much more of a shakeout do you expect there?'

GALLAGHER: 'I think we can see the 10-year German spread out to 200 basis points or so. We had a great run since mid-2012. There is a lot of profits to be booked. The ECB are not quite ready to pull the trigger in terms of QE. I think that's still something for the second quarter of 2015. And if you look at some of the comments from ECB officials today, they're not really trying to talk up QE expectations. If anything, they're trying to talk about structural reforms.'

JOURNALIST: 'Is Greece's debt still very much a concern in your view?'

GALLAGHER: 'I think Greece and Portugal are different from the rest of the European pack. I think they're in a very difficult situation. I think ultimately both will need precautionary credit lines from the EU and that's going to be something that they'll have to negotiate in Greece's case later in the year. There's no question that that will happen and the liquidation pressures will be there. It only becomes a wider European issue I think if we see Italian and Spanish yields blowing above 200 basis points in the 10-year area against bunds. Then people start to get more worried that this is not just a correction but could be the resumption of something more worrying. I don't think we're quite at that point yet. So I think Greece and Portugal are non-systemic in the European context.'