World stocks closed the week ended Monday 8th September 2003 higher, helped by another dose of strong economic numbers. The US technology-heavy Nasdaq composite index led the rally, rising by 4.3%, compared to a 1.8% gain recorded by the ?old economy? Dow Jones Industrial Average Index. Expectations for a strong second half of 2003 for the world economy also boosted European and Asian bourses. The FTSE Eurotop 300 index, which tracks the performance of Europe?s 300 largest stocks, rose by 1.7%. The Swiss and German bourses jumped by 2.3% and 2.2% respectively. A similar upward momentum was recorded for British stocks, which finished the week up by 2.1%. However, bond prices declined as investors shifted funds towards stocks. The possibility of higher interest rates in the months ahead dampened interest for bonds.

The sharp appreciation in technology stocks was mostly due to series of upgrade decisions by investment house Goldman Sachs and broker Merrill Lynch (ML). Based on a survey, ML expects Corporate America to increase its spending in information technology in the final quarter of 2003.

The survey results were positive for software makers Microsoft and Oracle, which climbed by 5.1% and 8.8% respectively. Moreover, analysts also upgraded the stocks in the computer hardware area following the re-estimation of the size of the personal computer industry.

Data provider Gartner Dataquest lifted the estimate of worldwide PC sales in 2002 by 17% to USD192bn. The largest upward revisions were in Europe. The combination of an expected rise in IT spending in the final quarter of 2004 and higher PC sales figures was regarded as positive for chipmakers.

Last week, Intel and STMicrolectronics rose by 2.0% and 9.4% respectively. News of increased expenditure by telecommunication firms ignited interest for telecommunication equipment makers. Last week, Nortel Networks gained 40.1% amid a USD1bn wireless infrastructure contract with Verizon Communications. Shares of mobile phone makers jumped on the news that Vodafone Group PLC intends to launch its third generation (3G) service with new handsets.

US manufacture on the mend

On the economic front, the US Federal Reserve Board?s latest Beige Book, which is an anecdotal survey of regional economic conditions, was encouraging, with 11 out of the 12 districts reporting increased level of activity during the summer. Another catalyst for the US economy was the positive trend for the US manufacturing sector.

The Institute for Supply Management indicated that the US manufacturing sector grew at its fastest rate in eight months. A separate report provided further evidence that the US manufacturing sector may be on the mend. The US Commerce Department reported that new orders for manufactured goods rose by 1.6% in July, more than twice the rate analysts had expected.

The service side of the US economy remained stable in August, as indicated by the ISM index of non-manufacturing conditions. However, investors were caught off-guard by the latest US employment figures, which remained weak (US non-farm payroll declined for the seventh consecutive month in August). The market was mixed about this piece of news as indicated by a 1.0% decline recorded by retailer Wal-Mart Stores but the rise of entertainment concern Disney (+4.2%) and home improvement chain Home Depot (+5.2%).

In France, Prime Minister Jean-Pierre Raffarin proposed to cut the income tax by 3% next year, as a move to spur economic activity. This move may however widen France?s budget deficit beyond 3% of its GDP limit allowed under European Union budget rules.

Contribution by Confident Asset Management