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Investment analysis

Equities started the New Year in much the same fashion as they ended 2003 until some very disappointing job numbers from the US and a shock statement from Shell on its level of reserves sent shares in Europe and the US into reverse. But the FTSE World index was still trading 1.9 per cent higher by the end of the week and, in spite of Friday&#39s setback, investors remain confident that stocks will make progress over the next 12 months.

It was a mixed start to the year for UK stocks, with a sharp fall in Shell&#39s share price after its shock announcement, pushing the FTSE 100 lower on Friday while earlier in the week the record-equalling 12 consecutive gains for the index came to an end.

However, it was a positive start to the year for mid and small caps as investors continued to chase cyclical stocks. The FTSE 250 and Small Cap indices rose by 1.7 per cent and 2.1 per cent respectively while the FTSE 100 was 1 per cent down.

In spite of a sharp fall on Friday, US stocks ended the trading week in positive territory. However, the weak December payroll report came as a shock and, having reached on Thursday its highest closing level since March 2002, the Dow Jones fell back to end 0.5 per cent higher. The S&P 500 index added 1.2 per cent while the Nasdaq gained 4 per cent.

In Europe, stocks moved to their highest level in 16 months on Thursday, helped by Nokia raising its earnings&#39 guidance for the last quarter. However, as was the case in the UK, the oil sector dragged most indices lower on Friday following the announcement from Shell. By the end of the week, the FTSE Eurotop 300 index was 0.3 per cent higher.

In Japan the Nikkei 225 rose by 2.7 per cent to its highest level in 11 weeks, with exporters and technology stocks leading the way following a brief weakening of the yen against the dollar.

Elsewhere in the Far East, investors begun the year in optimistic mood pushing the MSCI Asia-Pacific index to its highest level in nearly three years. In Hong Kong, a buoyant property sector helped the Hang Seng start the year with a gain of 4.6 per cent while in Korea and Taiwan stocks ended 2.6 per cent higher.

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