It is time to dip a toe back in to European stock markets, says Teun Draaisma, equity strategist at Morgan Stanley, who has shifted to an overweight position in the region for the first time in three months.

“We are reducing our cash weighting by 3 per cent, and increasing our equity weighting by 3 per cent,” he says. “We view this as a first step ahead of a bear market rally on the back of oversold conditions, attractive valuations, and falling inflation later this year, but we keep some powder dry in case markets fall again in the short-term.”