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Investment analysis

It was a mixed week for equity markets with gains in the US and the major European indices ensuring a positive return of 0.7 per cent for the representative FTSE world index. Equities in the UK, Japan and Hong Kong finished lower.

October was the best month for US equities this year despite worsening economic data, the latest of which was the conference board&#39s index on consumer confidence which fell to a nine-year low. October&#39s decline was the fourth consecutive monthly fall in the index and the biggest drop since last year&#39s September 11 attack. Preliminary reports on third-quarter GDP also came in weaker than expected. US stocks weathered these two disappointments well last week. The Dow gained 0.9 per cent and the Nasdaq rose by 2.4 per cent. US unemployment edged up to 5.7 per cent in October from 5.6per cent, not as bad as expected, and the Institute for Supply Management&#39s index on manufacturing activity eased to 48.5 from 49.5, slightly lower than expectations.

UK markets were not as resilient to the weak US data. The FTSE 100 finished 1.3 per cent lower. The index was also hit when its leading constituent, BP, fell to its lowest level for more than four years after the company issued its third production downgrade in two months and weaker than expected third-quarter figures. The mood was more upbeat for mid caps, with a 0.5 per cent gain in the FTSE 250 index while small caps remained flat. October&#39s domestic consumer confidence index, while slipping remained relatively high.

Gains in France&#39s CAC40 and Germany&#39s Dax of 1.7 per cent and 2 per cent were unable to prevent the FTSE Eurotop 300 losing 0.4 per cent. Tech and telecom issues performed well. Alcatel, the French telecommunications equipment maker, performed strongly after evidence that it was sorting out its debts. Germany&#39s Ifo business sentiment indicator, although lower for the fifth consecutive month, was better than expected.

It was volatile week in Japan, which saw the Nikkei 225 shed 0.5 per cent.

Hong Kong&#39s Hang Seng ended the week 3.2% lower, hit by the poor US data and news that China Telecom had delayed its huge public offering.

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