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Investment analysis

World equity markets put in a mixed performance last week and while the latest economic data was generally positive, investors took this to mean that US interest rates would rise sooner than had originally anticipated. By Friday&#39s close the FTSE World index had fallen by 0.9 per cent in dollar terms.

In the UK, large-cap stocks made solid progress as the dollar-earners returned to favour following a rise in the value of the green back. By the end of the week the FTSE 100 had gained 1.1 per cent to 4537 although the rest of the market fared less well with the FTSE 250 falling 1.3 per cent while the FTSE SmallCap index lost 0.6 per cent.

In the US, the fear of rises in inflation and interest rates following the release of positive employment, retail sales and manufacturing data kept a lid on share prices. The latest corporate earnings figures were mixed while the situation in Iraq continued to deteriorate. By the end of the week, the Dow Jones was 0.1 per cent higher although the S&P 500 fell 0.4 per cent while weakness in technology shares pushed the Nasdaq 2.8 per cent lower.

Having come within a fraction of their highest levels of the year, European shares fell back as investors digested the highest monthly rise in the region&#39s inflation rate since 1990 as well as another disappointing trading update from Nokia. However, the fall in share prices over the week as a whole was minimal with the FTSE Eurotop 300 index falling just 0.1 per cent.

In Japan, shares rose to their highest level for 32 months before falling on profit-taking. By the end of the week, the Nikkei 225 had fallen 0.6 per cent. Far East markets were mixed with 3 per cent rises in Taiwan and Thailand while falling Hong Kong fell by 3.5 per cent and Singapore was down by 1.9 per cent.

In the bond markets, US treasury yields rose to their highest level in four months on fears that interest rates would soon be on the way up. The yield on 10-year notes rose to 4.34 per cent while in the UK, gilts of the same maturity were yielding 4.92 per cent.

Sterling fell to a three-month low against a resurgent dollar before recovering slightly, ending at around $1.80.


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