Difficult week for equities

On Monday, European equity markets made a positive start to trading and moved higher by mid-morning, helped by strength in the banking and carmakers sectors. Merger activity in the Nordic financial sector provided early interest.

On Tuesday, the Japanese stock market lost ground, hurt by some bad news on the corporate front and fears some sectors have become overvalued. Low trading volumes at times exaggerated the effect of individual buying and selling, creating a nervous market.

On Wednesday, European and Asian stocks fell on concern that the increase in borrowing costs caused by the collapse of US subprime mortgages will hurt banks' earnings. Standard & Poor's 500 Index futures also dropped. European stock markets retreated after strong gains in recent days.

On Thursday, news that Eurozone and UK interest rates would be left unchanged failed to rally European equity markets. The European Central Bank held Eurozone rates at four per cent while the Bank of England also opted for no change for the UK.

On Friday, stocks in Europe and Asia fell, led by banks on concern that the contagion from losses in subprime mortgages will reduce profits. In the UK, BAE Systems Plc gained after The Times newspaper said the defence company may sign a £20 billion ($40 billion) order.

This article was compiled by Valletta Fund Management Limited, a member of the BOV Group. Valletta Fund Management, The Mall Offices, Level 6, The Mall, Floriana VLT 16. Freephone: 8007-2344. E-mail: infovfm@vfm.com.mt. Website: www.vfm.com.mt. VFM is licensed by the MFSA.