Global markets performed poorly last week as investors juggled with fears
of inflation and falling corporate earnings. The FTSE World Index ended the
week down by 1.9 per cent. Of the major markets, Japan and Hong Kong lost
3.7 per cent and 4.5 per cent.
In the US, mixed economic news caused confusion. The latest job figures
were better than expected but there was a negative showing from the
manufacturing sector where the purchasing management index for May fell
Alan Greenspan acknowledged, for the first time, that continued aggressive
monetary easing could fuel inflation, suggesting future cuts may be in
smaller steps. Investors still seem more concerned about falling corporate
earnings, judging by their reaction to Sun Micro Systems latest profit
warning. It lost 13 per cent on Wednesday.
The FTSE 100's recent attack on 6,000 was long forgotten as it saw four
consecutive sessions of losing performance. Friday saw the index firm up
amid hopes of a pre-election rally and a strong possibility of a further
cut in base rates when the monetary policy committee meet on Thursday.
UK markets had to cope with domestic news which showed a worryingly weak
survey of the manufacturing sector, suggesting it had declined to its
lowest level since Jan 1999. This tied in with data from Europe where the
purchasing managers index was also at its lowest level since January 1999.
Following the recent poor German business survey, last week saw similar
figures showing French business confidence has fallen to a two-year low.
Poor domestic news saw the UK market finish the week lower, with the FTSE
100 and the Allshare ending off by 1.4 per cent and 1.2 per cent. Small and
mid-cap stocks were unable to sustain their recent positive performance,
the respective indices losing 1.4 and 0.2 per cent.