Barclays bullish on developed markets

Barclays Wealth reiterated a positive outlook for developed world stocks, while noting that China is “near or at the bottom of the [economic] cycle”, after the leading Asian economy reported its slowest growth since early 2009.

According to the firm’s recent market report, a slowdown in Chinese economic growth was “largely policy induced” – rather than being indicative of fundamental problems. The most recently reported figure for annual GDP growth is 7.6 per cent – below China’s traditional 8 per cent minimum target. However, Barclays Wealth said this figure is “near or at the bottom of the cycle” in the country.

Elsewhere, the firm said that in spite of rising fears of a Spanish default and a Greek exit from the euro, global economic growth was not “teetering on a precipice”.

Although it warned that “volatility will return at some point, possibly with a vengeance”, Barclays tipped developed market equities as extremely inexpensive given current prospects, saying now could be “one of the buying opportunities” for the asset class.

Kevin Gardiner, head of investment strategy for Europe, the Middle East and Africa at Barclays, said developed markets had made “tentative progress” recently, in spite of shedding upwards of 3 per cent in some regions last Monday (July 23).

In particular, the wealth manager said sterling would continue to benefit from concerns about the ongoing eurozone debt crisis, as the UK’s central bank explored measures besides quantitative easing to boost growth.

Coupled with an anticipated rate cut from the European Central Bank (ECB), Barclays said this would cause the value of the euro in relation to sterling to “trend lower”. The firm also said it favoured shorting the euro against the dollar.

“The [eurozone’s] growth prospects remain challenging, and we expect the expansionary monetary policy by the ECB to continue to weight on the euro/US dollar over the quarters ahead,” Barclays said.