Friday, March 23, 2012

Barclay’s Capital Loves Oil, Do You?

In a research report, Barclay’s Capital was out with positive research notes for oil prices for the remainder of the year.  The investment bank expects prices to remain strong as oil benefits from low spare capacity, geo political issues, and rising economic growth.  

Apart from oil, Barclay’s also expects precious metals prices to do well overall as demand remains strong for commodities.   Apart from commodities, Barcllay’s continues to recommend lowering exposure to Europe as its ongoing credit crisis could hamper investment results.

From Market Watch’s Warangkana Chomchuen

Investors should shift their attention to assets that will benefit from high energy prices and stronger global growth, Barclays said in its quarterly global outlook report on Thursday.Barclays said oil may turn out to be an important theme for investors due to lower level of spare capacity, the geopolitical tensions in oil-producing countries, and economic growth that is picking up.
 The “oil market will be zesty all year,” said Michael Zenker, Barclays’ managing director in commodities research, at a press conference discussing the report.
 Barclays said the risks are skewed toward higher energy prices, but the U.S. is in a better position to benefit through increased energy production as it is less vulnerable than in the past cycles.
Base and precious metals are also expected to do well in the second quarter this year, with palladium, copper, and gold  GCJ2 +0.48%  expected to be the strongest markets, the report said.
 In terms of asset allocation, Barclays said it prefers equities to bonds. While the return on risky assets seems low, the bank said return on safer assets is even lower.
 Investors should also stay away from US treasuries as yields remain near their lows and below levels prior to the outbreak of European financial concerns
 “It’s a question of when, not whether, owning treasuries will become value-destructive,” Michael Gavin, Barclays’ international macro strategist, said at the press conference.
 Among its key recommendations, Barclays advised investors to reduce exposure to Europe as credit risks remain in euro-zone peripheral economies like Spain and Portugal. However, the report said Germany is an exception and will maintain its competitive position.   Read More

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