Positive Progress For International Equity Markets

International equity markets, as measured in US Dollars by the Morgan Stanley Capital International World Index (MSCI), made positive progress during most of the first quarter of 2007, gaining 2.06%. Currency movements continued to play an important role for internationally diversified investors, with the same index delivering performance of 1.46% and 0.67% for Sterling and Euro based investors respectively.

On the face of it, these headline numbers might indicate an environment of steady progress, and this is certainly how the quarter began. However, a five day decline of 6.1% through the end of February, along with the usual accompanying media frenzy, served as a stark reminder that equity market progress can rarely be described as steady. Subsequently, market composure has returned, but the reasons for the short-term setback are an extremely useful reminder of some critical factors which will dictate future market progress.