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Investment analysis

RAJ HALLEN Investment director,Premier Fund Managers

Although there were good gains in the Far East, it was a generally quiet week for equity markets last week as investors awaited the outcome of this week&#39s decision on US interest rates as well as the handover of power in Iraq. The FTSE World index rose by 0.4 per cent in sterling terms, having gained 2.2 per cent since the start of the year.

The news that the Bank of England&#39s monetary policy committee had voted unanimously in favour of the 0.25 per cent rise in interest rates earlier in the month came as no surprise to the markets and the FTSE 100 ended the week 0.3 per cent lower.It was a more positive week for mid caps, buoyed by a surge in housebuilders on Friday after the decision by Berkeley Homes to return cash to investors. The FTSE 250 rose by 1.5 per cent while the FTSE SmallCap index gained 1 per cent.

Although blue chips have outperformed since the market peaked in March, mid and small caps remain comfortably ahead since the start of the year, with the FTSE 250 and SmallCap indices having gained 7.3 per cent and 4 per cent respectively while the FTSE 100 has gained a mere 0.4 per cent.

In the US, a stronger showing by technology shares helped the Nasdaq gain 2.3 per cent although the broader market drifted lower as investors awaited this week&#39s meeting of the Federal Reserve, where it is widely expected that interest rates will rise for the first time in over four years.

The scale and pace of future increases remains unclear after the economic data revised first-quarter GDP down to 3.9 per cent from 4.4 per cent although there were signs of creeping inflation with the latest figures showing a further increase.

By the end of the week, the S&P 500 was trading 0.1 per cent lower while the Dow Jones index was off by 0.4 per cent.

Technology stocks were in demand in Europe although, as in the US, the broader market drifted lower, with the FTSE Eurotop 300 index down by 0.5 per cent.

It was a different story in Japan where hopes that the latest Tankan survey of business confidence this week will continue the recent positive trend. The Nikkei 225 gained 3.5 per cent, 10.3 per cent up since the start of the year.


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