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Investment analysis

Soothing words from Federal Reserve chairman Alan Greenspan on the outlook for the US economy resulted in gains for most of the world&#39s stockmarkets last week although a further rise in the pound once again diluted returns for UK investors overseas holdings. By the end of the week, the FTSE World index was trading 1.1 per cent higher in dollar terms.

In the UK, mid and small-cap stocks again outperformed, with a number of blue-chips being held back by concerns over the weaker US dollar, disappointing results from Barclays and GlaxoSmithKline as well as rumours of further selling of equities by insurance companies. The FTSE 100 gained 0.2 per cent while the FTSE 250 rose by 1.7 per cent, taking the index to its highest level since April 2002. Investors continued to focus on smaller companies, pushing the FTSE SmallCap index up by1.1 per cent.

In the US, a hostile bid by Comcast for Walt Disney breathed new life into the market, as did Greenspan&#39s comment that policymakers could be patient with regard to raising interest rates. Having reached a 32-month high, the Dow Jones fell on Friday to end the week 0.3 per cent higher while the S&P 500 rose by a similar figure. Technology stocks had a more difficult week, resulting in a fall of 0.5 per cent for the Nasdaq.

European stocks enjoyed their best session for over two months early in the week, pushing the FTSE Eurotop 300 index through the 1,000 level for the first time in almost 18 months but the level could not be maintained although the index still gained 1.1 per cent over the week.

In Japan, stocks clawed back some of their recent losses, with the Nikkei 225 rising by 0.9 per cent while elsewhere in the region, shares rose to their highest level in nearly four years as concerns over the impact of bird flu abated.

In the commodities markets, gold was a beneficiary of the dollar&#39s latest slide, pushing above the $416 level while oil prices also spiked higher following Opec&#39s surprise decision to cut production.

In the currency markets the dollar came under renewed pressure as it became clear that the currency would lack support following the latest G7 meeting.

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