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Investment analysis

It was another week of extreme turbulence in global stockmarkets as investors continued to sell, reacting to disappointing corporate data, the continued threat of another big bankruptcy and a worse than expected US trade deficit for May. The benchmark FTSE World index lost a further 2.1 per cent bringing its losses since the start of the year to 16.3 per cent

The US markets continued to fall despite a speech by President Bush and Alan Greenspan&#39s testimony before the senate committee, both on the fundamental strength of the economy. After breaking a seven-day losing streak on Wednesday, the Dow continued to fall in the final two sessions bringing its losses over the five days to 7.7 per cent. Dow Constituent IBM reported a 97 per cent fall in second-quarter profits compared with last year. On Friday, a report that a criminal investigation was being launched against Johnson & Johnson saw its share price tumble by 16 per cent. Negative guidance from Microsoft and Sun Microsystems added to the falls. Markets did not react well to a record US trade deficit which also caused the already weakened dollar to fall against the euro and the yen. The S&P 500 and Nasdaq, both of which remain stuck at 1997 trading levels, fell by 8 per cent and 3.5 per cent respectively.

There was some good news from Europe over the week but European bourses followed the US lower. Swedish company Electrolux, the world&#39s biggest home appliance maker, beat expectations for second-quarter earnings and Nokia met its forecasts. However, it was the broad sell-off at the start of the week which dictated events, leaving the FTSE Eurotop 300 off by more than 5 per cent and every French blue-chip stock and all but one of Germany&#39s Dax 30 constituents lower.

In the UK, a three-day rally on the back of good figures from the likes of mobile phone operator MMO2, software group Misys and Miner Rio Tinto, came to an abrupt end on Friday when investors responding to falls in the US, drove the indices lower.

In Japan, the Nikkei 225 fell back to a three-week low hit by a resurgent yen and sharp falls on Wall Street. The technology-sensitive index lost nearly 4 per cent over the week.

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