European stocks set for jump - end of the selloff or setting for a new crash

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.

Cash flow analysis compared to the DAX price movement paints a different picture. DAX opens in positive territory, while net cash flows remain below zero - indicating that bearish bets on European markets prevail. Last week, there was a tendency for markets to open on a higher note, only to be shorted by 14:00 local time ( the end of UK's lunch break - when U.S. traders wake up) and the volatility spikes. We remain cautious, at least until the real volatility returns to the markets - then it will be possible to judge the sentiment and to take an adequate decision for the future of the U.S. and European indices.

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.

Source: Bloomberg Pro Terminal

Jr Trader Alexander Kumanov

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