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Investment analysis

Global equities, which have struggled to find direction recently, continued to fall during the last week of May, as the India-Pakistan confrontation continued to dissuade investors in the short term.

US markets, which were closed on Monday for Memorial Day, continued to dominate investor sentiment. Earlier in the week, the outlook for the economy and renewed concerns about corporate profits sent Wall Street sharply lower. While personal income rose by 0.3 per cent and existing home sales leapt 7 by per cent in April, conflicting signs came from the consumer confidence index which showed that long-term expectations for the economy had fallen. Investors, sapped of confidence spent much of the week on the sidelines as technology and telecom issues dragged indices lower.

A surprisingly strong German Ifo survey and business confidence index from Insee, the French statistics office, were unable to provide support for European equities, with stock-specific issues dragging bourses lower. Deutsche Telekom continued its slide, closing at historic lows and well below the flotation price of six years ago. Mobile phone firm Nokia was another notable loser. However a UBS-Gallup survey showed investor optimism across Europe had improved in May.

The UK&#39s Techmark 100 closed at an all-time low on Wednesday following sharp losses in chip designer ARM Holdings and mobile phone operator MM02. ARM fell sharply on the back of a downgrade from UBS Warburg from a hold to sell and MMO2 shares fell by 12 per cent to a new low in midweek as investors reacted to slowing revenue growth. The blue-chip FTSE index narrowly missed its ninth negative session in 10 on Wednesday. UK house prices continued to surge in May, rising at their fastest annual rate for 13 years – 17.9 per cent according to the Nationwide.

Weaker than expected industrial production figures dented hopes of an economic recovery and sent Japanese markets lower. However, the Nikkei 225 has been the best-performing developed market index since the start of the year.

Elsewhere, Moscow slipped on softer oil prices and South Africa lost some of the previous week&#39s gains as gold shares fell.


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