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EQUITY MARKET INSIGHTS

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Equity markets around the world benefited last week from Wall Street's surge through the 7,000 mark on the Dow Jone...
Equity markets around the world benefited last week from Wall Street's surge through the 7,000 mark on the Dow Jones Industrial Average. The US market has been increasingly buoyant, reflected in the fact that it took 11 months to advance from 5,000 to 6,000, but only four months to rise from 6,000 to 7,000.

The UK equity market made further, more modest gains last week, closing on Friday at a new high of 4,341.0. There is some chance that the FTSE 100 will now move ahead more strongly, partly because it has underperformed both the US and European stock markets for so long, but also because some of the big institutions had become too pessimistic on the outlook for UK interest rates.

Recent economic data and a milder than expected Bank of England Inflation report have reduced expectations of an immediate rate rise, and the likely severity of monetary tightening post election. This week will provide the UK equity market with further evidence of the health of the real economy, in particular Wednesday's publication of January's retail sales data.

Meanwhile the merger and acquisition rumours continue to rumble on in the financial sector, providing short-term support for the market. The results season is also in full swing, with figures this week from Barclays, BOC, Medeva, Rank, Sedgwick and SmithKline Beecham. Analysts will be watching for any evidence that sterling's appreciation is damaging UK company profitability.
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