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Investment analysis

DAVID HAMBIDGE Investment director,Premier Fund Managers

World equity markets continued to drift lower last week, with a further rise in oil prices, continued unrest in Iraq and cautious trading statements from a number of high-profile technology companies undermining investor confidence. By Friday&#39s close, the FTSE World index had fallen by 0.4 per cent, leaving it 3.3 per cent lower since the start of the year.

In the UK, the FTSE 100 fell by 0.8 per cent in spite of signs that house price growth may be slowing and that interest rates may not have to rise too much further. Mid and small caps also fell, with the FTSE 250 declining by 0.5 per cent while the FTSE Small Cap index ended the week 0.7 per cent lower.

In the US, the Federal Reserve raised interest rates by 25 basis points to 1.5 per cent although the move had already been discounted by the markets. Alan Greenspan&#39s upbeat assessment of the economy provided a brief respite, with equities enjoying their best day for two months on Tuesday. However, by Wednesday, stocks were once again in decline, with a disappointing earnings&#39 forecast from Cisco Systems resulting in sharp falls in the technology sector. By the end of the week, both the Dow Jones and S&P 500 were trading 0.1 per cent higher although the Nasdaq fell by 1.1 per cent to its lowest level in 12 months.

It was a poor week for European equities with concerns over the US economy, spiralling oil prices and declining technology stocks all undermining investor confidence. By Friday&#39s close, the FTSE Eurotop 300 index had fallen by 1.5 per cent.

In Japan, the Nikkei 225 fell by 2 per cent to a three-month low in response to weaker than expected second-quarter GDP figures, which came in at an annualised rate of 1.7 per cent, significantly lower than the consensus figure of 4.2 per cent.

The Korean Kopsi index gained 5.7 per cent after a surprise cut in interest rates but most of the other markets in the region ended the week in negative territory.

It was a quiet week for bonds, with yields more or less unchanged while in the commodity markets, Brent crude rose for the 11th consecutive session, to its highest level since the futures market was launched in 1988.


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