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Investment analysis

Mixed messages on the outlook for the US economy from the previous week continued to be the focus, with investors banking further profits from the major bourses. The benchmark FTSE World index fell 0.3 per cent over the five days. The UK market, which has lagged the others recently, bucked the downward trend, with the FTSE Allshare index gaining 1 per cent.

In the US, economic data out early in the week confirmed an upturn in business spending as factory orders for June came in better than expected. Weekly jobless claims&#39 figures were also encouraging, falling below the 400,000 recessionary level for the first time since February. However the market&#39s lack of reaction suggested that a pick-up in the economy has already been priced in. Cisco Systems disappointed the market and dragged technology stocks lower after it failed to beat analysts&#39 earnings&#39 expectations. The Nasdaq fell by 4.5 per cent after five straight days of declines. The Dow gained 0.4 per cent but the S&P Composite lost 0.3 per cent.

Strong results from Barclays, the UK&#39s third-biggest bank, and GKN, the engineering and automotive parts producer, on Thursday and a broad-based rally on Friday helped the FTSE 100 to a weekly gain of 1.2 per cent. Medical devices group Smith & Nephew also helped the FTSE after merger talks saw the company top the list of blue-chip performers with a rise of 12.3 per cent. Profit-taking from midcap stocks saw the FTSE 250 index come off its highs and fall by 0.4 per cent while the FTSE Smallcap index continued to advance by 0.6 per cent.

Disappointing results from some of Germany&#39s leading companies, Commerzbank, Deutsche Bank and Bayer to name three, dragged the FTSE Eurotop 300 index down by 0.4 per cent.

In Japan, shares fell amid renewed doubts about the resilience of the US economy, with exporters suffering the most. Technology stocks followed the Nasdaq lower and by Friday&#39s close the Nikkei 225 had fallen by 3 per cent. Hong Kong&#39s Hang Seng index also lost 3 per cent with Cathay Pacific Airways, one of Asia&#39s biggest carriers reporting record first-half losses.


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