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Investment analysis

It was another troubled week for global equity markets as more disappointing corporate news and data suggested the economic revival may not be as imminent as previously thought. The benchmark FTSE World Index slipped by 2.9 per cent, bringing its decline to 9.4 per cent since the start of the year.

In the US, weaker than expected retail sales figures, which fell by 0.9 per cent in May, an uptick in jobless claims and a disappointing University of Michigan consumer sentiment index for June cast fresh doubts on a swift recovery for US corporate profits. Lucent, the telecoms equipment maker, added to the misery, announcing third-quarter revenues would be lower than anticipated. Further falls resulted after a revenue warning by Sprint, the long-distance telecoms provider. Not surprisingly, the Dow, S&P Composite and Nasdaq all lost ground falling by 1.2, 2.0 and 2.7 per cent respectively.

In Europe, selling was seen across the board as the FTSE Eurotop 300, testing fresh eight-month lows, fell 4.7 per cent. Telecoms continued to feel the pressure, especially the heavily indebted Deutsche Telekom and France Telecom, with both now at record lows. Among technology stocks, a prominent faller was Cap Gemini, Europe&#39s biggest IT services group, which fell to its lowest level for five years. Germany&#39s Dax and France&#39s CAC 40 fell by 6.6 per cent and 4.4 per cent.

In the UK, the FTSE 100 ended down by 5.9 per cent. Abbey National was the worst blue-chip, falling by nearly 20 per cent after a surprise profit warning. Insurance companies were forced to sell equities and buy bonds to meet regulatory solvency requirements. Economic news, showing an increase in average earnings and an unexpected fall in unemployment, did nothing to allay fears that there may be an interest rate rise as early as July.

Disappointing US economic data sapped confidence in a consumer-driven recovery for Japan&#39s exporters and sent the Nikkei 225 to a 15-week low, down by 4.5 per cent over the week.

A Kashmir peace move sent shares in both Karachi and Bombay higher. Pakistan&#39s KSE-100 index one of Asia&#39s smallest, has returned 33 per cent since the start of the year.


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