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Investment analysis

Most of the world&#39s stockmarkets gave up some of their recent strong gains last week on the realisation that the war in Iraq is likely to be longer than anticipated and on concerns over a pick-up in oil prices.

In the UK, the FTSE 100 fell by 4 per cent, leaving the index at just above the 3,700 level as a combination of war fears and a drop in UK consumer confidence weighed on sentiment.

Mid and small-cap stocks, which produced less spectacular gains over the previous two weeks, were slightly more resilient, with the FTSE 250 falling by 1.9 per cent while the Hoare Govett Smaller Companies index ended the week 0.4 per cent lower.

In the US, the Dow Jones fell by 4.4 per cent, largely as a result of its biggest one-day loss for six months at the start of the week. The broader S&P 500 also moved lower, falling by 3.6 per cent on the back of disappointing economic data, including the fourth consecutive decline in US consumer confidence. Technology stocks, which have held up relatively well this year came under selling pressure, leaving the Nasdaq 100 4.2 per cent lower.

European markets suffered some of the heaviest losses following the news that the IFO Business confidence index had fallen in March following two months of rises. The FTSE Eurotop 300 index fell by 5.2 per cent and the German Dax showed a decline of 7.2 per cent.

The one major market to buck the trend was Japan, where the Nikkei 225 ended the week 1 per cent higher. However, the gain was more to do with the market playing catch-up, having been closed the previous Friday, rather than on any underlying bullishness of the Japanese economy.

Elsewhere in Asia, investors were net sellers with stocks falling on a combination of news from the Gulf as well as fears that a deadly virus could have a highly damaging impact on the region&#39s tourist industry. Over the week, shares in both Hong Kong and Korea fell by 3.4 per cent.

Having sold off heavily over the previous two weeks, government bonds again benefited from their perceived safe haven status with yields of 10-year notes in the US, Europe and the UK ending the week lower.

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