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Improvement in US, Concern About Europe: Barclays' Kantor

Statue and Italian Flag in front of Vittorio Emanuele monument.
Ian Cumming | Getty Images
Statue and Italian Flag in front of Vittorio Emanuele monument.

There will be improvement in the U.S. economy in the second half of the year, said Barclays Capital managing director Larry Kantor, but there will be an overhang from continued uncertainty in Europe.

Kantor told CNBC Tuesday the U.S. improvement will come from lower interest rates, lower oil prices and Japanese production coming back on line after the earthquake earlier this year. But the situation in Europe, particularly in Italy, worries Kantor.

"Italy is the third-biggest indebted country in the world after the U.S. and Japan," he said. "If Italy can’t pay its debts, the financial system in Europe is in jeopardy. With the bank exposure, it’s huge."

He continued that regulators must "ringfence that, and in our view the steps they’ve taken are just temporary. The [European Central Bank] can’t keep buying this debt to keep the yields down. They need a more permanent solution and they’re just not there yet. So things in Europe probably get worse before they get better."

With even Germany's economy slowing, "it’s probably a good idea to stay with companies that are more domestically focused" in the U.S., Kantor advised.

"Do I believe stock priceswill be higher, say, six months from now? I do. What I’m not sure of is, [whether] you don’t go lower before you go higher," he said. He added that he doesn't "sense a strong direction here in the market right now."

While he made no specific stock recommendations, he said stocks are a good value right now. His strategy is to stick with a neutral stance toward risk.

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Disclosures:

Disclosure information was not available for Larry Kantor or his company.

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