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Investment analysis

The stockmarket rollercoaster took another round of the switchback last week as market commentators emphasised that the need for investors is to concentrate on individual stocks rather than trying to guess which way the indices are going to gyrate next.

The general test for a bear market used to be a 20 per cent fall in an index and, by those terms, this is certainly a bear but the same test applies also for a bull market and there have been rises of that magnitude during the past year. Perhaps this is a bear with an identity crisis or perhaps the volatility of the early 21st Century throws out the old rules.

The run-up to the first anniversary of the September 11 terrorist attacks and the seemingly inexorable move to war with Iraq took its toll on the markets last week. The attacks in North America last year have hit the market more than any disaster in recent history. One year after Pearl Harbour, the assassination of John F Kennedy, the resignation of Nixon and the invasion of Kuwait, the Dow had moved back into positive territory, with the exception of Pearl Harbour where the deficit was only around 1 per cent. But a year on from September 11, the Dow is still off by around 15 per cent.

Confidence remains low but, after the screens ran red for most of last week,Friday saw a sharp rally in New York on the back of an unexpected drop in unemployment. The uptick was triggered by a fall in the unemployment rate to 5.7 per cent from 5.9 per cent against expectations for an increase to 6 per cent.

However, on Monday this week the Dow fell by 0.7 per cent and the Nasdaq, which rose by 3.5 per cent on Friday, fell back by 1 per cent.

In Tokyo, the Nikkei set 19-year lows last week and twice fell briefly below the 9,000 level. A sharp bounce in bank shares led Japan&#39s Nikkei index to close 1.9 per cent higher this Monday, with market sentiment buoyed by US rises before the weekend and optimism over the Japanese government&#39s £17m anti-deflation package.

But markets in South Korea and Singapore declined in the early part of this week amid jitters over the possibility of military action against Iraq and the impact on oil prices.

Oil prices went through the $30 barrier on Friday last week but dropped back to around $28.40 early this week.

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