Barclays Capital Sees “A Treacherous Path” to Recovery

Policymakers are likely to do whatever is necessary to avoid another financial meltdown, but further deterioration in financial conditions will probably come first, according to Barclays Capital’s latest flagship quarterly research publication, Global Outlook: A treacherous path.

“European authorities, increasingly aware of the consequences of failure, will likely implement measures in the next couple of quarters that will avoid disaster,” said Larry Kantor, Head of Research. “That said, we expect worsening financial conditions and continued volatility in the meantime. We advise a neutral position toward risky assets.”

Among the key recommendations of the report are a preference for equities over bonds, with the best opportunities in emerging market equities, and targeted long positions in credit and non-agency MBS and CMBS.

Additional themes of Barclays Capital’s Global Outlook include:

• In China, inflation remains the key concern, but it appears to have peaked, reducing the risks of an unduly severe growth setback
• The US economy will continue to be constrained in the near term, but growth should move modestly higher into 2012
• In Europe, we see value in Sweden and the UK relative to Germany and other core euro area countries
• In foreign exchange, we recommend underweighting the euro, reflecting inevitably easier monetary policy from the ECB

About Barclays Capital’s Global Outlook

The Global Outlook research report, published quarterly, provides an assessment of all major economies and outlines the likely implications for global financial markets, including commodities, credit, economics, emerging markets, equities, fixed income and foreign exchange.

About Barclays Capital

Barclays Capital is the investment banking division of Barclays Bank PLC. With a distinctive business model, Barclays Capital provides large corporate, government and institutional clients with a full spectrum of solutions to their strategic advisory, financing and risk management needs. Barclays Capital has offices around the world, employs 25,000 people and has the global reach, advisory services and distribution power to meet the needs of issuers and investors worldwide. For further information about Barclays Capital, please visit our website www.barclayscapital.com.