This last period has seen the US Federal Reserve act to nudge interest rates up from 2.25% to 3.5% in five incremental stages, beginning in February 2005. There has been a limited response from equity markets which had broadly anticipated the shift in policy from what were accepted as unsustainably low levels.However, despite a strong end to the first quarter of 2005, the second quarter has seen markets falter somewhat with growing signs that the global economy will struggle to sustain its current level of growth towards the year-end and into 2006.The UK housing market is no longer a runaway train and this, together with retail sales weakness, has allowed the Bank of England to cut rates rather than continue with upward path it had pursued.Interest rate stability has meant that stock markets have risen, in contrast to those of the US. JapanÂ’s markets are higher also, despite a return to deflation and mixed economic data which disappointed after the strength of early 2004. In the Far East, some dollar sensitive markets have fallen, as rising US rates and a resurgent dollar pegged back competitiveness. Other markets not pegged to the Greenback (Korea, Indonesia) enjoyed good gains. In China, growth is slowing from the peak of 2004, but exports are still some 35% up year-on-year. Patience was running out with this power-house, and G7 calls for a float of its currency (upwards) to allow a narrowing of the trade imbalance were becoming louder and more frequent until the central bank eventually succumbed.