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Investment analysis

It was another volatile week for global markets, which absorbed weaker than expected economic data from the US to end the final week of a poor July higher. The benchmark FTSE World index finished the five days 1.3 per cent higher.

Following on from the previous week&#39s second-biggest one-day gain in history, Monday saw the Dow enjoy a

447-point gain, its third-biggest rise, as bargain-hunters sent financials and tech issues higher.

However, the bullish mood was unsustainable, as weak economic data pegged the indices back. On Tuesday, the Conference Board&#39s consumer confidence index confirmed a sharper than expected fall for July. Data out on Wednesday showed that second-quarter US GDP grew by just 1.1 per cent, much less than anticipated. On the same day, the Fed also highlighted that the economic recovery remained tentative.

Thursday&#39s manufacturing activity index confirmed a fall in July and Friday&#39s data showed a sharp drop in factory orders and job creation. Amid this data, the Dow and S&P 500 gained 0.6 per cent and 1.3 per cent respectively.

In Europe, as in the US, a rally in the financials and tech stocks led the bourses sharply higher at the start of the week. It was, however, a different story as the week drew on, with investors reacting to weaker than expected data from the US and domestic corporate data.

German insurance group Allianz sent the sector lower after a profit warning and tech stocks were hit at the end of the week as prospects for the chip sector were dampened. STMicroelectronics and Infineon, Europe&#39s number one and two chipmakers respectively, fell sharply.

The strong start, however, was enough to ensure that the representative FTSE Eurotop 300 posted a gain of 1.2 per cent over the five days. Germany&#39s Dax, however, ended 1.3 per cent lower. As expected, the European Central Bank maintained rates on hold.

In the UK, despite weak data from home and abroad, the FTSE 100&#39s fourth- biggest one-day gain in its 18-year history, achieved on Monday, saw the blue-chip index end the week with a gain of 1.5 per cent.


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