After a month's absence, and with a degree of inevitability, the technology sector is once again grabbing the headlines.

The US Nasdaq index, the main barometer and guide to the health of the world technology sector, had previously lost two-thirds of its value over a 12-month period ending in early April.

Since April, the index has achieved a modest recovery, though once again it has begun to run out of steam.

US companies typically report their profit figures on a quarterly basis and with the second quarter reporting season about to begin, the signs suggest a further set of profit disappointments and profit warnings.

At the end of March, the Nasdaq fell as low as 1640 and although it is unlikely the market will fall that low again, a retracement to well below 2000, currently 2050, looks inevitable.

Of what relevance is the path of the Nasdaq to the UK market?

Fortunately, or unfortunately, the path of most other world markets, including our own, are inextricably linked.

The link is direct in the form of UK companies who trade in the US, while negative sentiment is no respecter of national boundaries.

The modest recovery until recently pushed our FTSE 100 Index back towards 6000, though it has been unable to establish itself above this figure.

With interest rates unlikely to go much lower in the short term, the market looks likely to have a quiet and mildly disappointing summer.

John Pearson

Associate Director

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