Markets & data - The exporters strike back.

UK stockmarket The weakening of sterling, together with a batch of takeovers (eg, Eurotherm and Streamline Holdings), has led to a revival in sentiment towards manufacturing shares. The mid-capitalisation FTSE-250 Index continued to hit new highs during May. Meanwhile, the FTSE-100 failed to progress beyond the best levels of April: potential bids here (most recently for EMI) remain unconsummated. Overseas equities The smaller Asian markets are struggling again after some recovery earlier in the year. Relief that the immediate financial crisis had passed has been replaced by concern about the level of economic pain the region will be forced to bear. The main indices in Hong Kong, Singapore, Malaysia and Korea have fallen by over 20% since the middle of March. Interest rates Speculation is growing that the Federal Reserve is becoming more inclined to raise US interest rates, following more evidence of the strength of the economy. First quarter growth was at an annual rate of over 4% and unemployment is now at its lowest level since 1970. Signs of a slowdown in UK growth have increased confidence that base rates have now peaked. Exchange rates Investors appear to have stopped worrying and learned to love the euro. Despite the manoeuvring surrounding the latest stage in its gestation, investors seem more inclined to believe that the new European Central Bank will operate free from political influences. The main impact has been on sterling which fell to DM2.90, 6% below its highest level. Market data supplied by Britannia Investment Managers. Tel. (0141) 248 2000. Expressions of opinion contained within this document are subject to change. Britannia Investment Managers Limited is regulated in the conduct of investment business by IMRO.