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Investment analysis

It was a rollercoster five days for world equity markets last week, with a one-day loss of 5 per cent on the UK&#39s primary index being erased within 24 hours. By the end of an extremely volatile week, the FTSE World index had edged up by 0.4 per cent.

In the US, the three-year anniversary of the Nasdaq peak, when it reached 5,048, was met on Monday with a sell-off. The major indices both lost 2 cent on the day, with the Nasdaq finishing the day at 1,278. However, Wednesday and Thursday saw bargain-hunters buy stocks in the hardest-hit sectors to end the slide. Thursday&#39s gains were the biggest this year. Both the Dow and the S&P rose by 3.5 per cent while the Nasdaq registered a gain of 4.8 per cent. By Friday&#39s close, these indices were up 1.5, 0.5 & 4.4 per cent cent respectively.

It was a mainly positive five days for European bourses. The representative FTSE Eurotop, France&#39s CAC40 & Italy&#39s Comit 30 advanced 4.3, 6.4 and 1.6 cent respectively but Germany&#39s Dax declined by 1.2 per cent. Insurance stocks were the biggest winners, extending Thursday&#39s rally into Friday with Swiss Re, France&#39s Axa, ING and Benelux group Fortis climbing sharply over the two days.

One of the few FTSE Eurotop 300 losers was troubled German pharmaceuticals and chemical group Bayer – its latest declines followed news of 500 settlements reached over the anti-cholesterol drug Baycol.

The volatility of markets was clearly demonstrated in the UK, with the FTSE 100&#39s 5 cent fall on Wednesday, its seventh-biggest in history, being followed by a rise of 6.1 per cent, its best one-day rise in over 15 years. Property company Canary Wharf was the hardest-hit FTSE constituent, falling sharply after reporting an 81 cent drop in interim profits. However, strong gains from WM Morrison, Kingfisher, mm02, Old Mutual and Prudential ensured that the index posted a five-day gain of 3.2 per cent.

Sharp falls in Japanese equities earlier in the week ensured that the Nikkei ended with a loss of 1.7 cent despite a rally on Friday. However, Thursday&#39s gains on Wall Street did help soften the blow.


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