That said, while equity markets are generally weak, investors continue to place new money into emerging market funds. According to the latest weekly report from EPFR Global, investors added $318 mln to GEM Balanced funds in the week to Wednesday. That is well down on the previous week’s inflow of $2,249 mln but surprisingly good given that the MSCI EM Index fell 0.8% in that period. Still, that was relatively better than the 2.4% decline in developed markets over the week. Investors are still betting on an equity market rally to the end of the year and expect emerging markets to perform relatively better than their developed market counter-parts.

Russia funds, which have been out of favour both within GEM and Emerging Europe categories since the start of the 2nd half, have started to attract more money. Last week the total was $80 mln, which was a reversal of the outflow of $74 mln the week before that. By contrast, India funds took in $16 mln and Brazil funds reported new flows of $11 mln. China funds lost $199 mln (Taiwan funds lost $350 mln and that follows a redemption of $219 mln the week earlier). In Emerging Europe, Turkey funds, which were the favourite in the sector since July 1st, suffered the first week of redemptions since June with a loss of $25 mln.

Yesterday’s relief rally will not be extended this morning. Investors in Russian stocks are more likely to follow the weaker trend in Asian markets today and the closing weakness in Wall Street yesterday. Price moves will, however, be modest while investors everywhere wait for the revised US 2nd Qtr GDP report in the US. That will be published at 1.30 London time and is expected to revise growth from an initial estimate of 2.4% to only 1.4%. That reduced growth rate will confirm the validity of the bear’s stance and will leave all markets in a fragile mood coming into the last few days of the month.

The other report due today that also has market significance is the 2nd reading of the University of Michigan consumer confidence report. That is expected to be unchanged from the initial reading. This is a long weekend in the UK and GDR trade will not take place on Monday. Investors in that market will likely drift off early, i.e. immediately after the US GDP release and market activity will likely die in the early afternoon leading to a very quiet close in Moscow.

The US markets yesterday failed to hold onto morning gains that were prompted by the better than expected initial jobless claims report. The Dow Industrial Index is again below the 10,000 level (at 9,985.8) and the S&P 500 closed the say off 0.8% at 1,047.2. From a technical standpoint, the index is perched precariously around the 1,050 level that markets the completion of a “head and shoulders” pattern. Another reason for a large segment of market traders to remain nervous.

Oil continues to follow the equity market, i.e. because the same factors are driving both. The price of crude is also giving back some of yesterday’s gains in Asia today. Brent for October settlement is down almost 50 cents at $74.61 p/bbl and WTI is at $73.02 p/bbl (off 50 cents). Copper and other industrial metals are also down about 0.5%.

The yen appreciation continues as threats from the Bank of Japan to intervene fail to materialize. The yen-dollar rate is at 84.527 and the dollar-euro rate is at $1.2718. Gold last traded at 1,237.8 per ounce and is unchanged in Asia today.

Moscow’s bourses were again the high beta play in global markets, albeit with the low volumes that we have become used to this summer. The RTS closed up 1.7%, at 1,409/5, while MICEX ended the day up 1.6% at 1,356.4. The banks, which were the weakest market segment during the recent period of market decline, were not surprisingly the best performing yesterday. Sberbank closed up 3.6% on MICEX and VTB added 2.9%.

The better price of oil and the declining value of the dollar against the euro were reflected in the ruble market yesterday. The ruble added 8 basis points against the dollar, to close at 30.8077, while losing 2 basis points against the euro to end at 39.1376.

In the London GDR market, the day kicked off in mixed fashion with X5 reporting solid figures. The long X5, short MGNT trade has recouped 10% so far. Petropavlovsk's poor figures were expected and now it is probably time to cover. The company maintains a boost in production going forward and bearing in mind it has come back 25% in 2 months, it has now a considerable amount of safety built in. Russian ADRs in the US mainly followed the market trend and failed to fold onto opening gains. Mechel ended down 0.5% and Vimpelcom lost 1.0%. Wimm_Bill_Dann was the best of the names, closing 2.4% better. In Hong Kong today, RusAl is trading 0.5% better but also with low volume.

Chris Weafer is the Chief Strategist at Uralsib Group