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Investment analysis

The possibility of further terrorist attacks in the US and the India-Pakistan conflict over Kashmir were the focal points last week. Global markets lost nearly half the gains from the previous week as concerned investors locked in profits and the benchmark FTSE World Index lost 1.4 per cent.

It was a dull week in the US with stocks ending on a negative note. Chip equipment makers were hit after broker Goldman Sachs downgraded the sector. Also weighing on sentiment was a downward revision in GDP as first-quarter economic growth was revised to 5.6 per cent, still the fastest pace in nearly two years.

Earlier in the week, markets were supported by data showing better than expected durable goods orders and upbeat news from the second-biggest global pharmaceuticals group – Johnson & Johnson. However, this was not enough to stop, the Dow, S&P Composite and Nasdaq falling by 2.4 per cent, 2.1 per cent and 5.5 per cent respectively.

In Europe, the FTSE Eurotop 300 ended down by 1.7 per cent, close to the bottom of a trading range in which it has been stuck since November last year. Telecom operators came under pressure again. Deutsche Telekom fell after the heavily indebted firm, which a day earlier outlined weaker than expected core profit growth, was downgraded by Moody&#39s. Franco-Belgian bank Dexia saw its shares fall sharply after revenues came in below expectations. Bourses inevitably suffered, with France&#39s CAC40 shedding 2.7 per cent and Germany&#39s Dax down by 2.4 per cent.

In the UK, the blue-chip Footsie index lost all the gains from the previous week. The bulk of the domestic pressure came from GlaxoSmithKline, which lost 9.3 per cent over the week after a US ruling found that patents on one of its most important drugs were invalid. The second-biggest UK company&#39s decline was responsible for taking 36 points of the index on Friday. The FTSE small cap index lost 0.2 per cent.

On Thursday further evidence of economic recovery helped Japan&#39s Nikkei 225 hit a nine-month high. The Japanese market was the only developed one to gain ground over the week, pushing ahead by 1.1 per cent.

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