Major stock markets across the globe closed the week ended Monday 6th October 2003 in positive territory, despite increased tensions in the Middle East and risks of higher oil prices following strikes in Nigeria. Much of the week?s strength came on the back of last Friday?s economic report indicating better-than-expected employment data.

The widely-followed Morgan Stanley World Equity index, rose by 2.9%, extending its advance by 15.4% since the beginning of 2003. Technology and consumer cyclical stocks saw the biggest jump in prices during the week under review. Last week, the US technology Nasdaq Composite Index gained 3.8%, compared to a 2.3% jump recorded by the US Dow Jones Industrial Average. The US Labour Department reported that businesses had defied expectations by actually expanding their payrolls in September for the first time in eight months. A positive finding was the continuing growth of jobs in temporary services, considered as a leading indicator of full-time employment growth. Temporary services accounted for more than half of September?s job gains. French recruitment agency Adecco, which derives significant business from the US, saw its shares rise by 12.7% following the release of the US unemployment report.

London stocks jumped by 3.1% on the back of strong economic data, which indicated a positive outlook for the housing and manufacturing sectors. Analysts now fear that interest rates may rise from the current 3.5% p.a. to about 4.0% p.a. by end of 2004.

GBP-denominated bonds weakened on expectations of higher interest rates. Bourses across Europe also benefitted from the positive momentum on equities. Latest confidence surveys indicated that the Euroland economy was consolidating and could head up in the months ahead. The German Dax and the French Cac-40 indices ended the week up by 2.5% and 2.9% respectively.

Weak USD

The strong equity rally in America and improved global economic outlook boosted Asian stock markets. Stocks in Hong Kong and South Korea rose by 5.3% and 3.9% respectively during the week under review. Domestic news also contributed in sending Japanese equities up by 5.0%. The September Tankan survey indicated that the business outlook improved for large Japanese manufacturers. Another positive economic news was a drop in unemployment for the month of August 2003. However, analysts consider that Japan?s consumer spending may remain lethargic amid expectations of rising household savings and growing pensions obligations.

On the currency front, the USD remained weak against the Euro and GBP. However, the JPY weakened vis-à-vis the USD and this was mostly due to the interventions from the Japanese central bank. Analysts considered that Corporate America may benefit from a weak dollar environment since about 25% of the profits from the US top 500 companies come from operations abroad. Moreover, the weak USD is also expected to boost demand for US goods, which may help the American manufacturing sector. Last week, the Dow Jones US Industrial Index appreciated by 3.2%.

Contribution by Confident Asset Management Ltd