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Investment analysis

Another tough and volatile five days for global markets left most indices lower last week. The exceptions were the recently hard hit UK market, which was boosted by regulatory rule changes in the life insurance industry, and Japan, which was supported by the exporters. However, by the end of the week, the FTSE World index had lost 2.3 per cent.

Despite some positive economic data at the start and end of the week, US markets ended lower. On Monday, the Institute of Supply Management&#39s manufacturing index came in above 50 for the third consecutive month, confirming that the industrial sector was expanding and on Friday there was better than expected news on employment with non-farm payrolls increasing more than expected and the monthly unemployment rate falling from 6 per cent to 5.7 per cent. But shares slipped back as investors focused on geopolitical issues and corporate news. US Secretary of State Colin Powell&#39s address to the UN on the case for military action against Iraq did little to inspire investors. Over the week, the Dow, S&P 500 and Nasdaq 100 had lost 2.4 per cent, 3 per cent and 2.6 per cent respectively.

European equities sealed their fifth straight winning day on Monday but downward pressure across a spectrum of sectors made it difficult to sustain the forward momentum. Swedish telecom group Ericsson came under pressure after its ninth consecutive quarterly loss. French group Alcatel added to gloom in the sector, forecasting a 25-30 per cent drop in sales for the first quarter. Falls in telecoms hit semiconductors, with Infineon, STMicroelectronics and Dutch group ASML suffering. The pharmaceuticals sector was put under pressure midweek following results. French group Aventis fell after it cut its profit and sales guidance and falling revenues pushed Irish drugs group Elan lower. By the end of the week, the FTSE Eurotop 300, Dax & CAC40 had fallen by 2.9 per cent, 6.5 per cent and 4.8 per cent respectively. The European Central Bank left eurozone rates on hold.

In Japan, the Nikkei bucked the downward trend, gaining 1.3 per cent. Hong Kong&#39s Hang Seng index ended 1.2 per cent lower.


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