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It was a mixed quarter for world equity markets, with excellent returns in Japan and Asia but slighly disappointing performance of the UK, US and European markets. By the end of the quarter, the FTSE World index had risen 0.6 per cent in sterling terms.

In the UK, the FTSE 100 rose to its highest level in 18 months in January and economic data showed unemployment had fallen to its lowest level for 28 years. As a whole, the UK economy grew at its fastest rate in four years during the second half of 2003.

However, this, coupled with further strength in the housing market, prompted the Bank of England to increase interest rates for the second time in three months in February, increasing the base rate by a quarter of a point to 4 per cent.

Concerns over the health of the global economy and the terrorist attacks in Spain led to stocks to decline sharply in March. The FTSE 100 recorded its biggest single-day fall since May last year and fell to its lowest level since December.

By the end of the quarter, the FTSE 100 had fallen 0.8 per cent, but mid and small caps continued to do well – the FTSE 250 gained 8.4 per cent while the FTSE Small Cap index ended the period up 6.9 per cent.

In the US, economic data continued to point to a recovery, although there was concern over the level of job growth. Most corporate earnings&#39 statements were also positive although much of this had already been reflected in share prices.

Although shares moved higher early in the quarter, the sharp fall in prices following the Madrid bombing as well as dollar weakness led to a fall for the main US indices over the quarter. The Dow Jones declined by 3 per cent and the S&P 500 fell by 1 per cent. Technology shares gave up some gains of the previous 12 months with a 3 per cent fall for the Nasdaq.

In Europe, economic and corporate data was positive but GDP growth for the last quarter of 2003 was slightly lower than expected. Eurozone interest rates were left at 2 per cent – the ninth consecutive month with no change. European stockmarkets moved to their highest level in 20 months in March before falling sharply after the Madrid bombings. By the end of the quarter, the FTSE Eurotop 300 ex UK index was 2.8 per cent lower in sterling terms.


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