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Investment analysis

A hat-trick of interest rate cuts all at 50bp by three of the biggest central banks in the world, the Federal Reserve, European Central Bank and the Bank of England, ensured that global markets in the main ended the week higher.

In the US, interest rate optimism helped investors shrug off poor economic news on Monday when the purchasing managers&#39 survey of the service sector showed another sharp fall in sentiment in October.

The Fed, as expected, cut rates for the 10th time since the start of the year, when rates stood at 6.5 per cent, to 2 per cent.

There was some cheer from networking company Cisco Systems, which reported sales and earnings above Wall Street&#39s expectations and some better news on the jobs front, where weekly jobless claims fell from 496,000 in the previous week to 450,000.

In Europe, the latest evidence of declining industrial production in Germany, Spain and the Netherlands along with weakening business and consumer confidence persuaded the ECB to act decisively, reducing rates in the Eurozone surprisingly by 50bp to 3.25 per cent. It appears rather belatedly that ECB president Wim Duisenberg has accepted that the Central Bank&#39s duty to control inflation must be balanced by concerns for the real economy.

The BoE joined in the monetary easing, giving UK industry a much needed boost on Thursday with a 50bp cut in base rates, (analysts were expecting a 25bp cut) bringing UK rates down to 4 per cent, their lowestlevel in nearly 40 years.

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