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Investment

Concerns about corporate profits continued to weigh on global markets last week, driving all the major indices lower. The representative FTSE World index lost a further 2 per cent.

Better than expected consumer confidence data failed to inspire US shares last week – the University of Michigan&#39s closely watched index of consumer sentiment rose in December.

However, the Government reported sharp falls in producer prices prompted fears of deflation. Iraqi-related tensions still remained as UN inspectors examined 12,000 pages of reports submitted by the Baghdad regime. The Federal Reserve, as expected, left rates on hold at 1.25 per cent. On the corporate side, financials fell following reports of further congressional investigation into their roles in the Enron scandal. Poor performance by Intel and IBM also weighed on the Dow, which fell by 2.5 per cent over the five days. The tech heavy Nasdaq was off by 5.6 per cent.

In Europe, technology and telecommunication shares continued to shed their gains from previous weeks. Infineon and Cap Gemini fell sharply on Monday, the following day, Nokia set the tone with a cautious note on the outlook for the fourth quarter. On Friday, the insurers got in on the act following a downgrade for Dutch insurer Aegon by Moody&#39s. By the end of the week, the benchmark FTSE Eurotop 300 index had shed 3.6 per cent.

In Germany, the ZEW Institute&#39s expectations indicator fell more than expected for the sixth successive month and despite a technical rebound in financials, which saw the Dax climb by 3 per cent on Tuesday, Germany&#39s blue-chip index ended the week 4.1 per cent lower. France&#39s CAC40 shed 3.4 per cent.

In the UK, the FTSE All-share, 100 and 250 indices all fell by 3.4 per cent over the week. Financials, which represents the largest slice of the UK market, led it lower. A raft of profit warnings coupled with increasing concerns about the fragility of the housing market bubble started to make investors nervous about the state of the lenders. Barclays, Abbey National, Royal Bank of Scotland and Lloyds TSB all lost ground, with the latter falling to its lowest level in more than five years.

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