World roundup

Stockmarkets ended the year on a high note, with the majority of indices recording their first year-on-year gain since the bursting of the technology bubble. Fuelled by an improving US economy and a diminishing of geopolitical tension, markets started the new year with a vigour and optimism in stark contrast to the start of 2003.

FTSE Eurotop 300 ex UK: 1022.48 from 1009.83
The FTSE Eurotop 300 hit a year-high on the last trading day of 2003 and recorded its first year-on-year gain since 1999. This came in spite of the euro reaching lifetime highs against the dollar. Its final spurt was boosted by retailers Ahold and Carrefour, as Asda’s announcement of strong pre-Christmas trading gave the market room for optimism.

An announcement by Korea’s Hyundai Motor that exports had soared in 2003 despite the weakness in the dollar propelled car manufacturers Peugeot and Renault higher. Technology stocks also did well after a series of broker recommendations that labelled technology a major beneficiary of global economic recovery.

The scandal at Italian dairy group Parmalat was in the headlines, putting downward pressure on leading banks exposed to the company, but Capitalia and Banca Intesa had appeared to shrug off problems by the final session of the year.

Dow Jones: 10454 from 10341
A run of disappointing economic data dented the performance of US blue-chips in the last few days of 2003. Data from the Conference Board’s consumer confidence index, the Chicago Purchasing Managers’ index and the National Association of Realtors all came in below analysts’ expectations, knocking retailers and homebuilders.

This was mitigated to some extent by a surprise decline in the weekly US jobless claims figures on the final day of trading, which helped end the year on a high note. US steel stocks were boosted by news that China is to lift import tariffs. Pharmaceutical stocks were also up as courts ruled in favour of Pfizer in two patent challenges, and Merck announced that it is to resubmit its arthritis drug to the US Food & Drug Administration.

The Dow Jones extended its gains on the first day of trading in 2004.

Nasdaq: 2003 from 1975
Gains by Cisco Systems and Ciena, on the back of new contracts from the Pentagon, could not stop the Nasdaq from falling on the final day of trading in 2003. It remained above the psychologically important 2000 level, but only by a whisker. This was a small setback in the context of a year where the Nasdaq rose around 50% on the back of a strong recovery in technology stocks.

Semiconductor firm Rambus was one of the top performers for the period as reports suggested a favourable end to its legal wrangling with rival Micron. IBM also saw strong gains following its announcement that it had received a 10-year contract to manage the mainframe technology infrastructure of retailer Target.

Source: Fund analysis company Forsyth Partners
The week ahead
Analysts are optimistic that stockmarkets can hold on to their early gains as US economic recovery spreads to other parts of the world. However, higher interest rates and the weakness of the dollar are predicted to weigh more heavily on markets in the second half of the year. Trading updates from retailers are expected to be the main focus of interest in January.

FTSE 100: 4510 from 4441
After three down years, the FTSE 100 ended 2003 in positive territory. It finished the year with nine straight days of gains, although trading volumes were predictably thin and corporate newsflow slow.

The impetus for the gains came from fund managers ensuring their portfolios were fully invested, and book-squaring for the year-end.

Retailers were in focus after Asda reported record trading in the week before Christmas – Wm Morrison, J Sainsbury and Tesco all followed Asda upwards. Media stocks were also in favour as the most likely beneficiaries of the global economic recovery.

Housebuilders had a muted reaction to a Nationwide report that forecast an unchanged 9% rise in house prices for 2004. There was no sign of the rally fading at the start of the new year as the FTSE 100 started its first trading day of 2004 with vigour.

Nikkei 225: 10677 from 10373
Japan was a surprise winner in 2003, despite continuing economic inertia, ending the year with its first annual rise since 1999. Trading volumes hit new highs during the year, as investors were tempted back to Japanese markets by perceived low valuations and the government bailout of Resona Bank.

Financial and steel stocks garnered most interest from investors in the final days of trading because of their high liquidity. Steel companies were also helped by China’s decision to end retaliatory tariffs on steel products. Blue-chips such as Canon and Sony were favoured following rises on Wall Street. Japanese car makers also gained on Hyundai Motor’s announcement of soaring 2003 exports.

The Nikkei started 2004 in a similarly upbeat style, rising 1.68% in the first trading day of the New Year.

Asia pacific
FTSE Asia/Pacific ex Japan:

215.85 from 209.98
Asian stockmarkets ended a top-performing year in style, crowning a year that saw an advance of more than 60% in the composite index. This came in spite of a suspected case of Sars in China’s Guangdong province. Bangkok was the top-performing index of the year; energy and banking stocks continued to attract buyers as the year drew to a close.

A top Thai performer was oil and gas group PTT on news of an acquisition of oil fields in the Gulf of Thailand. The Hang Seng closed the year with its first annual advance for three years as investor confidence proved strong enough to counter worries over Sars. The Indian stockmarket ended the year as the second-best performing Asian market after economic growth in the second quarter hit 8.4%.