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Investment analysis

After stalling and looking for a sense of direction the week earlier, global markets moved ahead strongly last week, albeit amid low volumes, with US retail sales figures providing some impetus. The FTSE World index gained 2 per cent as a number of indices touched multi-month highs.

In the US, markets moved ahead strongly on Tuesday after Federal Reserve policymakers voted unanimously to leave short-term interest rates unchanged at 1 per cent and indicated they were in no rush to lift rates from their current 45-year lows. Stronger than expected retail sales figures for July, up by 1.4 per cent month on month, also boosted investor sentiment. The Dow touched a near 13-month high and ended with a gain of 1.4 per cent, the S&P 500 was up by 1.3 per cent and the Nasdaq rose 3.8 per cent after losing some headway in the previous week.

The oil sector provided support for the European bourses early on following the recent strength of crude prices and some positive broker comments on the sector.

Corporate news continued to be positive during the week and enough to push the FTSE Eurotop 300 out of its two-month trading range to a high for the year. The Dax and CAC40 returned to winning ways, moving ahead by 3.4 per cent and 3.6 per cent respectively.

A growing belief that the US would spearhead a recovery later this year acted as the catalyst that saw the FTSE 100 breakout of its summer trading range last week. The index closed above the psychologically important 4,200 level on Thursday, ending the week 2.4 per cent higher at its best level since August 28 2002. The focus on economic recovery was reflected in the performance of sectors, with IT hardware, construction and engineering among the best and the defensive – beverage, tobacco and health sectors the laggards. The mid and small caps, which saw some profit-taking recently continued to drive ahead with their FTSE indices gaining 3.6 per cent and 2.6 per cent respectively.

Upbeat domestic economic news and strong US retail sales figures fuelled the rally in the Japanese market, which made progress in each session.

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