"In this environment, continued caution is required and we suggest highallocations of liquid instruments to take advantage of futureopportunities," said Larry Kantor, Head of Research at Barclays Capital."However, with assets already priced for severe economic weakness and a newUS administration coming that seems determined to take decisive action, wedo recommend some modest risk positions. Investment grade US credit assetsappear attractive; they are already trading at spread levels close to highsreached in the Great Depression, and would likely lead any market rally."

Major themes of Barclays Capital's Economic and Financial Market Outlookinclude:

-- The global economic contraction will find a bottom around mid-year 2009, but the recovery will be well below par. Barclays Capital is not expecting sustained deflation.-- Opportunities exist in US investment grade credit, where there are large risk and liquidity premiums.-- Equities in major markets do not appear as cheap as credit instruments, but Barclays Capital favours modest positions in Europe over the US.-- Underweighting recommended for both equity and non-investment grade credit in emerging markets.-- OPEC production cuts may soon lend support to oil prices, but similar supply management is not expected to benefit other commodities in the near term.

This research publication, published quarterly, provides an assessment ofall the major economies and spells out the likely implications for globalfinancial markets, including commodities, credit, economics, emergingmarkets, 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 largecorporate, government and institutional clients with a comprehensive set ofsolutions to their strategic advisory, financing and risk management needs.Barclays Capital has offices around the world, employs over 20,000 peopleand has the global reach, advisory services and distribution power to meetthe needs of issuers and investors worldwide. For further information aboutBarclays Capital, please visit our website www.barclayscapital.com.

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