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So far, so good. European equities bourses kicked off Monday in the black, rebounding from the worst sell-off in two years.

After the open, the German Dax index climbed 1 per cent, the French CAC 40 gauge advanced 0.69 per cent, and the UK FTSE 100 benchmark climbed 0.64 per cent.

The pan-European Stoxx Europe 600 index tumbled 5 per cent last week, the worst performance since the first week of 2016 that was marred by worries over China. On Monday the index rebounded 1.1 per cent.

Trading last week was marked by intense tumult that was particularly acute in the US. On Thursday, US markets halted one of their longest runs without a 10 per cent correction since 1930, according to Goldman Sachs.

“No single catalyst sparked the decline,” said David Kostin, the New York investment bank’s chief US equities strategist.

Mr Kostin echoed other analysts in saying that concerns over higher inflation and rising bond yields started the sell-off, but that it was exacerbated by technical factors, such as algorithmic trading and the collapse of funds betting on falls in volatility.

He added that “most equity market corrections recover without developing into bear markets or presaging recessions.”

Steven Wieting, global chief investment strategist at Citigroup’s private bank, offered a similar opinion:

The key question is if this is a mere 24th 10% drop, which has historically transpired on a near annual basis for the past 30 years, or is it the start of a new economic contraction?

For the later scenario to transpire, we would almost certainly need to see credit and banking markets weaken far more than they have. Equity weakness (and preceding exuberance) has been unusually isolated to the asset class.

In a sign of the calm at the start of this week, Asian stocks were broadly higher. The Shanghai Composite rose 0.8 per cent and Seoul’s Kospi was up 0.9 per cent. Wall Street also found support in late Friday trade, with the S&P 500 ending up 1.5 per cent on the session, trimming its fall for the week to 4.4 per cent.

US stock futures were also looking up. S&P 500 futures climbed 0.63 per cent, Nasdaq 100 futures gained 0.43 per cent and Dow Jones Industrial Average futures advanced 0.68 per cent.

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