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Investment analysis

The terrorist atrocities in Istanbul last Thursday gave investors every excuse they needed to bank profits and although most of the world&#39s equity markets ended the week lower, losses were not excessive given that many markets had started the week at or near to their highest level of the year. By the end of the week, the FTSE World index had fallen by 1.6 per cent.

In the UK, defensive stocks were in demand, with investors continuing to bank profits in cyclical stocks that have performed so well over the last six months. Among the blue chips, utility companies produced the strongest returns, with National Grid Transco and Scottish & Southern Energy both gaining 4.7 per cent. There was plenty of activity in Vodafone Group with the shares ending the week 3.5 per cent higher following the company&#39s announcement that it is to buyback £2.5bn worth of shares as well as raising its dividend by 20 per cent.

Among, the losers there were sharp falls for Schroders, which fell by 10.5 per cent, while Aviva was the hardest hit of the insurers, with its shares falling by 8.6 per cent.

In the mid-caps, recent high flyer last saw its shares fall by 25 per cent following a disappointing set of results while shares in BA fell by 14 per cent mainly as a result of the terrorist attacks.

By the end of the week, the FTSE 100 was 1.8 per cent lower, maintaining its recent outperformance of mid and small caps, with the FTSE 250 falling by 2.6 per cent and the FTSE SmallCap index losing 2.5 per cent.

In the US, technology stocks bore the brunt of the selling for the second consecutive week, resulting in a 1.9 per cent fall in the Nasdaq in spite of the fact that news from the sector was generally positive. The defensive utility and energy stocks attracted the most money, with both sectors ending in positive territory. However, the broad market ended lower. with the S&P 500 and Dow Jones Industrial index both falling 1.4 per cent.

The higher beta European markets which begun the week close to their highs for the year, underperformed with events in Istanbul hitting travel and insurance stocks particularly hard.


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