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Investment analysis

Following a poor Monday, international bourses moved ahead strongly last week as investors reacted positively to the possibility of a Fed rate cut this week and the International Monetary Fund&#39s $30bn Brazilian rescue package. The FTSE world index made up some of the ground lost in July, gaining 4 per cent.

Negative sentiment swept through Wall Street early in the week following the release of data on the US service sector activity which showed it to be weaker than expected. However, four consecutive days of gains on the back of an anticipated Fed rate cut, a stronger dollar and short covering saw the Dow and S&P Composite end the week 5.2 per cent and 5.1 per cent higher respectively.

Gains were broad among all sectors, with interest-rate sensitive financials Citigroup, American Express and JP Morgan Chase performing well. Bullish sentiment was also fuelled midweek by Cisco Systems when the company reported sales and earnings figures ahead of analysts&#39 expectations. However, problems continued at Worldcom with a further $3.3bn in improperly accounted earnings being uncovered. Although slipping back slightly on Friday, the tech-heavy Nasdaq 100 still gained 5 per cent over the five sessions.

Having started the week poorly, a 4.4 per cent one-day gain on Tuesday and a strong finish to the week ensured the FTSE Eurotop 300 ended 5.4 per cent in positive territory. Swiss equities dragged Europe lower early on but led the region back as the week wore on. ABB, the Swiss-Swedish engineer bounced back sharply, as did insurer Swiss Re.

On Thursday, Spanish banks spearheaded a strong rally as news of the $30bn IMF bail-out package for Brazil, the biggest in the IMF history, eased worries of the sectors loan commitments to the troubled region. Santander Central Hispano, which owns Brazil&#39s third-biggest private bank Banespa, gained 8.2 per cent. Other companies with exposure to Brazil, namely Telefonica and Portugal Telecom which control&#39s Brazil&#39s biggest mobile carrier TCP, also performed well.

In the UK, a strong final couple of days powered the indices ahead, with the FTSE 100 gaining 6.1 per cent over the week.


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