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Investment analysis

World equity markets made up some good ground last week despite the deteriorating situation in Iraq, which send crude oil futures prices to record highs. Corporate newsflow was generally positive, helping the benchmark FTSE World index gain 2.4 per cent by Friday&#39s close.

In the UK, bid speculation provided support and helped the FTSE 100 make a weekly gain of 1.6 per cent. Shell, which rose by 2.7 per cent on the week, was linked with a bid approach from French oil company Total.

Sainsbury&#39s was also caught up in bid rumours following a meeting with US food retailer Target and it looks likely that HBOS would launch a counterbid for Abbey National. Mid and small caps also made gains, with the FTSE 250 rising by 1.7 per cent while the FTSE Small Cap index ended the week 0.4 per cent higher.

In the US, markets shrugged off the higher oil prices and focused on strong corporate results which highlighted pockets of growth in the economy. Home Depot shares rose by 8.9 per cent after reporting a 19 per cent rise in quarterly profits. Elsewhere in the retail sector, Staples, the office supplier, enjoyed a rise of 8 per cent after raising its full-year growth forecast and discount store operator Kmart was 15.2 per cent after reporting second-quarter profits.

By the end of the week, the Dow Jones and S&P 500 were trading 2.9 per cent and 3.2 per cent higher respectively. The Nasdaq did even better, rising by 4.5 per cent as Google made its eagerly awaited market debut.

It was a better week for European markets, with leading shares staging a modest rally off 2004 lows which saw the FTSE Eurotop index 1.1 per cent firmer despite of concerns over the rise in oil prices and the reinsurance sector.

In Japan, the Nikkei 225 responded to strong US market performance by gaining 1.2 per cent from its three-month low. Exporters were the biggest beneficiaries given their sensitivity to economic sentiment and trends in the US. Elsewhere in the Far East, shares in Korea continued to make up for some of their recent underperformance, with the Kopsi index gaining 1.5 per cent. In Taiwan, strength in blue-chip technology companies saw the weighted index there gain 4 per cent.


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