The Fed's exit strategy and doubts regarding China are disturbing the calm of the markets. The Fed's announcement that it might reduce its quantitative easing towards the end of 2013 if the macroeconomic conditions continue to evolve favourably has surprised the financial markets. Initially, the upswing in volatility was widespread at a global level, hitting the emerging countries particularly hard. Yields rose on both safe haven bonds and riskier options and the global stock market was shaken. These outbursts of volatility have been exacerbated by increasing tensions in China's credit market. This time Europe is not at the epicentre of the destabilizing factors but neither has it helped to calm the markets with its slowness and lack of ambition in measures to definitively resolve the institutional deficiencies it still has.

The Fed will only moderate its bond purchases if the macroeconomic situation improves substantially. The timeline it has set to withdraw stimuli depends on the unemployment rate falling, a drop that might be delayed if the activity rate increases as growth gains ground. For the moment the recovery is continuing, albeit at a moderate rate. First quarter growth in GDP has been revised downwards to 0.4% quarter-on-quarter but this does not change the forecasts for the coming quarters. The latest economic indicators support this scenario, especially in terms of improvements in tertiary sector activity and consumer confidence. The real estate market is also continuing to support the US recovery although somewhat less than expected.

In China, the central bank has also called for calm. The Shibor, China's interbank interest rate, picked up at the end of June due to problems related to the lack of liquidity in shadow banking and the central bank's initial reticence to respond quickly as it had previously tended to do in this kind of situation. These problems coincide with new signs of cyclical containment for the Chinese economy, suggesting that growth will be lower this year and the next, although its rate will still be enviable (7.6% and 7.8% respectively). Given this panorama, the central bank ended up guaranteeing liquidity for those institutions that need it, thereby putting an end to the financial tensions of the last few weeks. On the other hand, although the reacceleration of the Chinese economy will be slower than expected, we must not forget the large amount of foreign reserves it holds and its ample room to apply stimuli should the need arise.

Capital flows to the emerging markets are diminishing. The factors that had encouraged inflows of liquidity, namely very easy monetary conditions in developed economies and better growth prospects in emerging economies, have gradually waned. The emerging economies' growth prospects are no longer so firm while these have improved slightly in developed countries. Moreover, the notable depreciation of emerging currencies against the dollar over the last few weeks has reopened an old debate: the sustainability of the current account deficit of some of these economies, such as South Africa, Turkey or India, making them more vulnerable to capital outflows. Episodes of social and political instability in Brazil and Turkey are not helping the situation either.

The ECB remains immobile and has reaffirmed its commitment to maintain an expansionary monetary policy while the economy is still weak. The Fed's announcement that it will be moderating its stimuli alarmed Europe's sovereign debt markets, with significant rises in yield both in the core and periphery countries. Given these fluctuations in the market, Mario Draghi affirmed that they are prepared to act whenever necessary and keep the bond purchase programme in operation. Activity in the euro area continues to show signs of stabilizing within an overall fragile scenario and GDP is expected to grow in the third quarter. Although the script is being followed in terms of activity, advances in institutional reforms still appear to be fragmented and restrained. The latest exponent has been the agreements reached by the European Council with regard to the bank resolution mechanism, whose limited resources create some doubts as to whether this can really be an effective instrument to break the connection between sovereign and bank risk.

In Spain, structural reforms are taking a centre stage. In accordance with the European Commission's guidelines, the government has announced the key elements in the long-awaited public administration reform, whose aim is to rationalize the public sector and make it more efficient. Its rapid implementation, as well as that of the rest of the planned reforms, is the main guarantee for sustainable growth in the long term. For the time being, economic growth is still being supported by the foreign sector, so that consolidating the foundations for a more competitive, efficient and flexible economy has become even more imperative than ever.