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Investment analysis

Most of the world&#39s stockmarkets produced solid gains during December, helping equities to record their best performance since 1986 and the first year of positive returns since 1999.

During December, the FTSE World index rose by 4.6 per cent, a gain of 27.9 per cent over the year.

In the UK, the FTSE 100 ended the month with nine consecutive gains, its best run since June 1999. Over the month, the index moved 1.5 per cent higher for a gain of 13.6 per cent over the year and a rise of 36.2 per cent from its low point on March 12. Mid-cap stocks enjoyed a positive month, with the FTSE 250 gaining 0.9 per cent, leaving it up by 34.3 per cent over the year. The best 2003 returns came from smaller companies, with the FTSE SmallCap index up by 0.8 per cent in December for a gain of 36.8 per cent for the year.

The US economic recovery remains on track, with November&#39s industrial production figures pointing to the strongest manufacturing gains in four years. Equity markets were given a boost following positive job numbers as well as the Federal Reserve saying it has no plans to increase US interest rates from 1 per cent.

US stocks ended 2003 on a bright note, with the Dow Jones moving above 10,000 for the first time in 18 months, ending December 5.6 per cent higher. Over the year, the index gained 25 per cent, its best performance for seven years.

The Nasdaq regained the 2,000 level for the first time in nearly two years. In December, the index rose by 0.7 per cent to end the year 50 per cent higher.

December also turned out to be a positive month for the broader market, with the S&P 500 rising 3.9 per cent for a gain of 26 per cent for the year.

European stocks ended at their high for the year in spite of Parmalat as investors chose to focus on a further improvement in business confidence in France and Germany and on hopes that the region&#39s economy will grow by more than anticipated. By the end of December, the FTSE Eurotop 300 index had risen by 1.2 per cent for a gain of 8.4 per cent for the year.

In Japan, the Nikkei 225 rose by 2.6 per cent in December for a gain of 24.5 per cent over the year.

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