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Investment update

There was little respite for equity investors last week with further tension in the Middle East and no let-up in the level of suspicion surrounding corporate America continuing to depress share prices.

In the UK, the FTSE 100 fell by a further 0.5 per cent. As well as the TMT stocks that again came under pressure, the insurance sector also came in for some heavy selling with investors worried over solvency margins in the industry.

Among the junior indices, the FTSE 250 suffered the heaviest decline, ending 2.4 per cent lower while the FTSE Small Cap index fell by 2.2 per cent and the Techmark 100 by 0.7 per cent to an all-time low.

On the economic front, May retail sales figures proved to be surprisingly weak, which, although not good news for growth, makes an increase in interest rates in July somewhat less likely.

Among international stockmarkets, the picture was no better with US shares falling for the fifth consecutive week, leaving the Dow Jones (-2.3 per cent) at its lowest level in nearly eight months while the S&P 500(-1.8 per cent) and the Nasdaq (-6.7 per cent) also ended the week trading close to their September 21 lows.

In Europe, stocks chalked up their fifth straight week of losses, with the telecom sector again under pressure, leaving both Deutsche Telecom and France Telecom at record lows.

In Japan, stocks continued to give up most of the gains of the previous five months, with the Nikkei 225 ending with a decline of 5.2 per cent in spite of some good export numbers which were nearly twice as strong as expected.

Elsewhere in the Far East, markets tracked the US lower, with Hong Kong&#39s fall of 3.3 per cent to a four-month low fairly typical of the region as a whole.

Oil prices again firmed while gold continued to trend higher, reflecting its perceived safe haven status.

Bonds also enjoyed another positive week, with prices also reflecting the fact that interest rates in the UK,US and eurozone are unlikely to rise in the short term.

In the currency markets, the euro reached a 26-month high against a weak dollar, having risen by 8 per cent this year and 12 per cent since the end of January.

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