In July, global financial markets demonstrated positive trends. Market players were focused on the statements made by the heads of the US Federal Reserve and the ECB.

We would like to remind that the statement made by the Chairman of the Federal Reserve Ben Bernanke in June, quite unexpectedly and for the first time since economy stimulation programmes were launched in 2008, on possible closure of QE caused a sharp drop of stock and bond prices. While the stock market recovered quickly due to the positive macroeconomic news and fair corporate reporting, the global bond market continued to be under strong sellers’ pressure at the beginning of the month. And then, as it has happened many times over recent years, representatives of the monetary authorities intervened once again. First, the President of the ECB M. Draghi, at a press conference after the ECB meeting on July 4, announced that the European regulator would keep interest rates at a minimum level for a long period of time. Then it was the turn of Ben Bernanke, who tried to allay fears of the market participants about the early closure of economy stimulation programmes. In reply to journalists' questions following publication of the minutes of the June meeting of the FOMC, he said that the stimulating monetary policy would continue in the US in the nearest future, and that the Federal Reserve wanted to see clearer signs of recovery of the labour market. In a week, he spoke before the US Congress in about the same vein. Such positive statements of the US and European monetary authorities made it possible to release tension on the market of US and German government bonds, which spent a month in a side corridor. This, in turn, had a positive impact on the markets of government and corporate bonds of developing countries, which showed an increase for the month, although not nearly enough to cover the June losses.

Major global stock markets, especially those of developed countries, showed a fairly good growth for the month, due to the release of macroeconomic indicators and corporate reports. The main feature was the fact that finally data indicating improvement in the economic situation in Europe began to appear. In their turn, the data from China, which set the tone for the developing markets, continue to be of concern to investors. Thus, economic growth in China in Q2 2013 amounted to 7.5% (y/y), and for the first six months 7.6%, being the lowest since 1999. This, in turn, causes analysts to lower economic growth forecasts for most other major emerging economies as well.

This news background led to stock markets of developing countries lagging behind the developed markets considerably again (over the month the MSCI Emerging Markets Index showed growth of only 0.7% against 5.2% of the MSCI World Index).

The fund managers adhered to the previously developed strategy. In the stock funds, indices of developed countries have most weight, with investments in developing countries being virtually non-existent; hence a considerable share of the funds’ assets is constituted by the cash component. Apart from the overall very weak dynamic of developing markets, such a structure is also due to the very negative trend shown by exchange rates of these countries both against the euro and the US dollar. Therefore, even in the countries where the stock markets show more or less decent growth, the fall of local currencies virtually offsets this growth and sometimes even gives a negative result.

The bond funds retain a considerable cash component too due to continued high volatility and the negative market sentiment. In purchases, the most fundamentally attractive shorter term bonds with high coupon yield are preferred, which will ensure greater stability of the funds’ share value if the current market trends continue.