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Investment analysis

In a week which saw accounting concerns cross the Atlantic to Europe, a strong final-day rally in the US was sufficient to prop up global equity markets, with the benchmark FTSE World index shedding just 0.2 per cent.

Investors in the US shrugged off unemployment data, which showed a rise to 5.9 per cent, focusing instead on the fact that there were no terrorist attacks on Independence Day.

The blue-chip Dow gained over 300 points in the final session, which saw relieved investors buying large-cap stocks across all sectors, with information technology, healthcare and financials leading the gains. The shortened week saw the Dow gain 1.5 per cent, the broader-based S&P index, which earlier in the week saw its lowest close since January 1998, lost a marginal 0.1 per cent while the Nasdaq 100 gained just under 1 per cent.

In Europe, concerns about corporate credibility were increased during the week by a report that French media group Vivendi had tried to massage its accounts – the company&#39s share price fell by 25 per cent on Tuesday, with ratings agency Moody&#39s downgrading its credit rating to junk status.

A bounce-back on Friday led by TMTs saw the FTSE Eurotop 300 gain almost 4 per cent on the day and 0.5 per cent over the week.

France Telecom was the day&#39s bestperforming blue chip, gaining 17.6 per cent, Deutsche Telekom had its biggest one-day rise in more than a year of 11 per cent and Vivendi pulled back 16 per cent. Individual bourse performance was mixed, with the Dax gaining 2.3 per cent while the CAC40 shed 0.9 per cent. The ECB, as expected, left rates at 3.25 per cent.

Strong performance from the Footsie in the final two sessions saw the UK blue chip index recover from a five-year low set on Wednesday to end the week down by almost 1 per cent.

Best-performing large-cap constituent was mmO2, gaining 10.7 per cent. Mid and small caps underperformed for the second consecutive week, losing 2 per cent and 2.5 per cent respectively. As anticipated, the Bank of England left rates unchanged at 4 per cent.


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