World stocks closed the week ended Monday 18th August 2003 higher as positive economic reports boosted investors? confidence in equities. Improving macroeconomic fundamentals led to a broad-market rally, which was seen more pronounced in the riskier areas of the investment spectrum, namely technology, media and telecommunication stocks. Major bourses ended the week at their highest level for the year 2003. However, trading activity level was low, which is a recurring phenomenon during the summer holidays in the Northern Hemisphere.

The American technology-laden Nasdaq composite index rallied by 4.7%, while the ?old economy?Dow Jones Industrial Average Index climbed by 2.1% to 9,412.45 (its highest level for fourteen months). Last week, American stocks also showed some marked resilience amid last week?s power outage in parts of the US and Canada. Investors considered that the temporary power blackout (economic and social costs were estimated at about $6bn) would marginally impact the $10 trillion U.S. economy and corporate profits. Business conditions in the US improved for the fourth consecutive month in early August, according to the investment house Morgan Stanley.

European stock markets also witnessed significant gains for the week as indicated by the eight consecutive sessions of gains recorded by the FTSE Eurotop 300 index, which tracks the performance of Europe?s 300 largest stocks. The index rose by 3.4% to 901.61, its highest close since December 2002. A similar upward momentum was recorded for British stocks, which finished the week up by 2.3%. The FTSE 100 index, UK?s equity benchmark, closed at its highest level since August 2002. Stronger-than-expected retail sales for the month of July, healthy job market and historically low interest rates in the UK helped to rekindle interest in British stocks.

Investors were lured back to Asian stock markets as economic data that suggested that the global economy was on the recovery track. Japan?s benchmark equity index, the Nikkei 225, gained 5.7% during the week under review to finish above the psychologically key 10,000 mark for the first time in a year. Japanese authorities indicated that the country?s real gross domestic product grew by 0.6% in the second quarter of 2003, which exceeded analysts? estimates. The data, coupled with a healthy US economy, strengthened the view that the Japan may experience a cyclical recovery earlier than expected. Investors focused on Japanese blue chips. Japanese exporters are considered as prime beneficiaries of an economic rebound. Shares of Sony, Toyota Motors and Nec rallied by 5.2%, 5.8% and 11.1% respectively.

Contribution by Confident Asset Management