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By Jenna Voigt | Published Aug 21, 2012

Barclays: Expect “cooling off” for equity markets

A bull run in equity markets over recent weeks will give way to a “cooling off period”, according to Barclays Wealth and Investment Management.

Equity markets continued to rise today as London’s FTSE 100 index climbed 0.34 per cent to 5,844 points at 11:50 in London.

Europe’s Stoxx 50 index gained 0.64 per cent, to 2,482 points, while Germany’s Dax benchmark picked up 0.44 per cent, to 7,064 points.

But Barclays has said the current price-to-earnings ratio for many equities suggests “limited further upside in the near term,” citing negative macro-economic conditions in Europe, particularly in debt-laden Greece.

“Recent bank lending and manufacturing order book statistics in Europe imply that data will likely get worse before it gets better,” the firm said.

“And we’ve learnt to remain wary of the Greeks whether they’re bearing gifts or not.”

But Barclays said equities continued to appear undervalued over the longer term, and tipped stocks in US and European markets.

Barclays said the regions had been the focus of concerns over the past year and said policymakers in both regions were committed to promoting growth and building closer fiscal integration in the single currency area.

The firm also said it likes information technology stocks and consumer discretionary in the US because the former is more diverse and “markedly cheaper” than in the UK, while the firm took a positive view of US consumer finances.

Barclays said it least favours European utilities and telecommunications companies which “no longer provide much shelter as structural headwinds and and excessive leverage have come home to roost”.

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