Barclays Wealth's flashpoints for this week

Market volatility will continue this week, with income stocks attracting the eyes of investors, says Barclays Wealth equity strategist Henk Potts.

Summary

• Euro area fiscal issues will be with us for a long time
• However, markets' focus could shift - particularly if US data stabilises

Equities

• Market volatility expected to continue
• Income stocks likely to continue to be attractive to investors

Fixed Income

• Central banks co-ordinate in order to secure US dollar funding
• Sentiment, or idiosyncratic risk, is the main driver of current market volatility for European Banks

• Moody's downgrades two French banks this week.

Currencies

• The US dollar, the yen and the franc benefit from low correlation with risk.
• Scandinavian currencies lack liquidity and their economies are relatively open.
• While Japanese debt/GDP is high, only small portion of local bonds is held externally.

Commodities

• Key agencies downgrade demand forecasts highlighting risks of demand destruction.
• While this may weigh on prices in the short-term, this is not a repeat of 2008-09
• Supply-side risks pose a higher risk and should support prices in the medium and long term.