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Investment analysis

With continued uncertainty surrounding the Iraqi situation, a batch of profit warnings and mixed economic data, it was little surprise that investors made a hasty retreat out of global equities last week, sending the FTSE world index down by 4.7 per cent

In the US, Tuesday saw industrial production figures which showed a fall of 0.3 per cent in August – the first monthly drop this year – against expectations of a small rise. Further bad news followed throughout the week, including earnings&#39 worries from JP Morgan, a disappointing quarterly report from software giant Oracle and an earnings&#39 warning from Electronics Data Systems, the worlds second-biggest IT outsourcing company. The commerce department reported the number of new home starts fell for the third consecutive month. Against this backdrop, the blue chip Dow fell below the psychological 8,000 level to end the week 3.9 per cent lower. The Nasdaq lost 5.7 per cent.

Although Friday saw a tech rebound end a four-day slide in European markets, the FTSE Eurotop 300 lost 6.2 per cent over the five sessions. Much of the gloom was experienced yet again in the insurance sector which fell to six-year lows. Swiss Life saw its shares fall by over 18 per cent to its lowest levels in nearly 10 years after disappointing first-half losses. The sector was also hit by Aegon&#39s difficulty in placing its euro 3.5bn share offering. European banks suffered as JP Morgan&#39s news crossed the Atlantic. Germany&#39s Dax heavily weighted in insurance and banks declined the sharpest, losing 8.8 per cent, with France&#39s CAC40 not far behind, losing 8.4 per cent.

UK markets followed the US lower, with the FTSE 100 falling below 3,800 on Thursday. The index closed the week down by 3.7 per cent. Economic news was encouraging, with retail sales for August 0.6 per cent higher.

Japan&#39s Nikkei 225 bucked the global downward trend by gaining 2.6 per cent. The exporters pushed the index over the 9,500 level on Tuesday, on a weaker yen and the banks were the biggest beneficiaries, gaining 7 per cent on Thursday following the Bank of Japan&#39s unprecedented decision to buy shares directly from them.


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