Oil to drive markets, Barclays warns against higher risks

High crude and commodity prices are making a dent in the global economy. Experts feel that the trend is likely to continue for sometime now.

In an interview to CNBC-TV18, Peter Redward, Head Rates Research for Emerging Asia, Barclays Capital said that the market is likely to be driven by oil prices. Though he sees higher risk in global economy, Redward hopes that the European Union situation will stabilise. However, crude bulls have faded recently amid worldwide demand erosion due to the recent higher prices. Crude oil, nevertheless, is still the leader in the raw commodity market sector. If crude oil prices back off some more, many other commodity markets, including precious metals, will likely do the same, or at least see upside price potential limited. As far as the currency market is concerned, Redward feels that the dollar will remain weak as the effect of QE2 will be modest. On the other hand, he said that the commodity market will go up due to the ongoing weakness seen in the dollar. "Commodity prices are likely to continue to head north and the global demand for them is to remain robust," he added. Redward also warned that Chinese economy is slowing down while monetary tightening still continues to be a concern. "If Chinese growth slows down in the second half of the year, then perhaps some of the shine in commodities is going to come off in the medium term," he concluded. Also watch the accompanying video.