The most awaited and significant event of the month for financial markets was the March 17–18 meeting of the Federal Reserve System by which conclusion the market players anticipated the clarification of the Central Bank position regarding terms and the degree of toughening of monetary policy.

Following the healthy data in the labour market, more severe FRS announcement was expected, however, subsequent to the results of the meeting and press conference with Janet L. Yellen following the meeting, investors were given a sign that the dynamics of policy rate increase may be more moderate and, largely, will depend on incoming macroeconomic data. Investors were again given the hope to get adjournment and it caused a short-time flush of optimism in the stock market.

Nevertheless, at month-end, some markets showed various performances. While the main US market index S&P 500 lost 1.7% within the month, the index of European countries STOXX Europe 600 gained 1.3%. Investors started to take into consideration more the dynamics of currencies exchange rates, primarily the exchange rate of EUR. Due to continuous weakening of EUR, European companies become more competitive in the global market, their EUR yields grow. Therefore, in March a stronger growth of price quotations showed the companies with a high share of export in revenues. The beginning of ECB QE programme gave additional support to the European market. At this background, the markets of periphery countries joined a general growth, demonstrating outperformance.

The US stock market showed different tendencies. Having sufficiently high stock value, American companies started to be stuck and without additional stimulus, it led to the market consolidation at the achieved levels. Investors looked for new opportunities, making selective purchases, and due to this, the dynamics in various sectors varied. The sectors of pharmaceutic, technologies and consumption looked better than the market and showed a healthy growth at the zero growth of the market.

The emerging markets showed again negative yield, having lost 1.6% a month. For fairness sake, it is worth mentioning that the stock markets in local currencies of many emerging countries showed growth, however, the sag of these currencies to US dollar caused negative results in dollar equivalent. The Chinese stock market was one out of few markets that brought decent yield to investors. Since the beginning of the year, the index of the Shanghai stock exchange grew by more than 15%, the main index of the Hong Kong stock exchange grew by 6% within the same period. This growth was encouraged by the anticipation of investors who expected the launch of the government programme for economics support. At the end of March, the reduction in the first payment from 60% to 40% on the purchase of the second accommodation was announced, and stimulating measures if needed were promised by the Central Bank of China. Besides, Chinese stock exchanges started to become available for international investors. Just a reminder, in autumn last year, the stock exchanges of Shanghai and Hong Kong were partly united that in reality granted an opportunity for foreign investors to buy shares in the Shanghai stock exchange (before it was available for a limited number of investors). In its turn, now large Chinese market players can buy shares that are being traded in the Hong Kong stock exchange. This reform has caused a fierce rally in the Shanghai stock exchange since last November and has resulted in the growth of stock index by more than 50% and in turn, it positively influenced Hong Kong.

Fund managers followed the main tendency “to hold”, but taking into account the “selectiveness” of the markets, some tactic actions were implemented within the rotation between sectors and certain countries. In the industrial funds, due to last months’ underrun, the share of financial sector was increased. For the same reason and in connection to the stabilization of prices in the commodities markets, in the fund portfolios ETF of the corresponding sectors were included. At the same time, in the US industrial fund, the share of public health service was significantly reduced due to its strong and fast growth. Since the beginning of the year, the growth of health service sector was more than 11%, the growth of pharmaceutical sector exceeded 23% that is the reason why now these sectors look overbought. In the European industrial fund, the share of protective sectors was reduced in favour of cyclic sectors, in particular, the positions in the sector of telecommunication and public utilities were liquidated due to the lack of investors’ interest in protective sectors at this stage of the market. In fund of the global market, the share of Europe was increased and the share of emerging countries was decreased. The growth in the exchange rate of dollar and the anticipation of US interest rate increase are the major obstacles for the beginning of a full-scale growth in the stock markets of the majority of emerging countries.

The global bond market was mostly influenced by the policy of the FRS and the ECB. Uncertainty in the anticipation of FRS decisions provoked the growth of US Treasuries yield in the first half of the month and resulted in the growth of volatility in all segments of the market. However, milder than expected rhetoric of Janet Yellen calmed the markets down that encouraged prices to return to previous levels.

The bond market denominated in euro was more stable due to the beginning of the stimulating QE programme. The yield of German Bunds reached the next minimum, but this might we consider nominal — the decrease in three main points cannot be called significant. Nevertheless, this factor renders significant support to the market in general. The credit risk premiums remained at the existing levels both in the segment of High Grade bonds and in the segment of High Yield corporate bonds — in both dollars and euro.

Against general, relatively calm background, the segment of Russian Eurobonds outstood continuing its significant growth primarily based on the absence of Ukrainian escalation and softening rhetoric of the Western countries regarding the sanctions. The absence of bad news is good news. This fact was taken into account by the market players who started to buy both Russian government and corporate bonds. The good reporting of issuers from the metallurgic sector became additional support to the market along with the offer of preschedule retirement of bonds from of a wide range of issuers. On one hand, it indicates the absence of financial problems with debt servicing at many corporations, on the other hand, it reduces the number of securities from the market in the conditions when in the nearest future new issues are difficult to anticipate. The yield of many bonds looks inadequately high considering credit quality of issuers. In the mid-term, we expect these tendencies to remain. The main attention of investors will be concentrated on the US macroeconomic statistics basing on which the market members will try to forecast FRS actions. The fund managers stick to the tendency “to hold”. Depending on the situation development, we plan either to increase or decrease the share of High Grade bonds as well as to regulate the duration of the portfolio.