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Investment analysis

Although global markets finished lower – the representative FTSE World index shed 2.8 per cent over the five days – a near 6.4 per cent gain for the Dow in midweek, its second-biggest gain in history, provided some cheer for investors.

In the US, there was no getting away from accounting irregularities. Shares in AOL Time Warner, the world&#39s leading media company, fell by over 15 per cent on Thursday, hitting a four-year low, after it confirmed that the SEC was investigating a series of transactions AOL had made prior to its merger with Time Warner.

On the economic front, poor durable goods data overshadowed encouraging employment news. The commerce department confirmed that durable goods orders fell by 3.8 per cent in June and a report from the labour department showed that jobless claims had fallen to their lowest levels in 17 months.

It was a mixed week for the indices, the beleaguered blue-chip Dow, which had lost over 15 per cent in the previous two weeks, clawed back 3.1 per cent, the broader-based S&P 500 made a marginal gain of 0.6 per cent while the tech-heavy Nasdaq fell by a further 5.6 per cent.

It was another volatile week for European bourses, with life insurers and telecoms dragging the indices lower. The FTSE Eurotop 300 fell by 3.2 per cent. At the start of the week, Dutch insurer Aegon cut its 2002 profit forecast by a third and its share price fell by nearly 18 per cent on the day, dragging down Skandia, Swiss Life, Axa and Zurich Life. Both sectors continued to fall over the week. Friday saw telecom equipment maker Ericsson fall by 13.5 per cent after rating agency Moody&#39s cut its short-term debt to junk status – shares in Alcatel and Nokia fell on the news. Worst-hit market was Germany – the Dax lost 8.2 per cent, extending its losses this year to 30.6 per cent.

After falling 9.3 per cent in the first two days of trading and hitting levels last seen in September 1996, a strong Wednesday in the US saw the FTSE 100 index cIaw its way back to end the week just 2 per cent lower. The blue-chip index was also encouraged by the University of Michigan&#39s consumer sentiment survey for July, which, although down, was better than economists had expected.

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