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Investment analysis

World equity markets continued to push ahead last week on the back of further encouraging economic and corporate data before profit-taking set in towards the end of the week. By Friday&#39s close, the FTSE World index had risen by 0.5 per cent.

In the UK, blue chip stocks enjoyed a rare week of outperformance, with the main reason for the change in fortune being the news that Standard life had sold £7.5bn of shares over the previous few weeks to meet its solvency requirements.

By the end of the week, the FTSE 100 was trading at close to its highest level for 18 months having risen by 2.3 per cent. It was also another positive week for mid and small-cap stocks with the FTSE 250 gaining 1.8 per cent, leaving the index at its highest level since June 2001, while the FTSE SmallCap index ended 1.3 per cent higher.

Although earnings&#39 reports and economic data were generally positive, US stocks slipped into negative territory as a result of profit taking on Thursday and Friday. By the end of the week, the Dow Jones and S&P 500 had slipped by 0.4 per cent and 0.3 per cent respectively while the Nasdaq fell by 0.7 per cent, its fifth straight weekly decline.

In Europe, equities enjoyed a positive week with optimism on the economy and corporate earnings helping to push the FTSE Eurotop 300 index up by 1.7 per cent and above the psychological 1,000 level.

Japanese stocks ended higher, with the Nikkei 225 gaining 1.5 per cent following the release of much better than expected economic data which showed the economy having grown by 7 per cent in the ast quarter, the fastest rate of expansion since 1990.

Other Far East equity markets were generally positive, with Malaysia posting the strongest return, gaining 4.3 per cent while in Hong Kong the Hang Seng continued its good run, rising by 0.9 per cent.

It was a particularly volatile week in the currency markets, with sterling rising above $1.90 against the US dollar for the first time since 1992 before profit-taking saw a sharp fall towards the end of the week. Sterling moved to its highest level for five years against the yen as well as pushing higher against the euro.


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