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Investment Analysis

It was another miserable week for the world&#39s equity markets as investors continued to worry over the outlook for the global economy, corporate earnings and the renewed weakness of the dollar.

In the UK, the FTSE 100 fell by 1.6 per cent to 5342, its lowest level for three weeks, with telecom stocks the main casualties. Former market leader Vodafone again fell heavily, with shares ending the week at 127.5p, their lowest level for nearly three years.

Meanwhile, the latest economic numbers were somewhat mixed and although the fall in inflation from 2.4 per cent in June to 2.2 per cent in July was welcomed, average earnings rising at 4.8 per cent coupled with a strong labour market and increasing retail sales may make it difficult to justify a further cut in domestic interest rates.

In the US, further downgrades in the technology sector left the Nasdaq languishing at its lowest level since April 10 while the broader based S&P composite fell to 1161, its lowest close since April 9.

The Dow Jones, which has been somewhat more resilient than the other two major indices this year, ended the week down by 1.7 per cent, its lowest level since mid-July.

Given the negative sentiment elsewhere, it was no real surprise that European equity markets continued to struggle, with telecom stocks, which have fallen by around 15 per cent this month, again proving to be the worst performers.

In Japan, the Nikkei 225 fell to a new 16-year low despite the surprise decision by the Bank of Tokyo to further loosen monetary policy.

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