China’s overnight rate cut boosted sentiment, but investors remain nervous about diving back in to stocks after this week’s volatility.

Stocks attempt to recover in final session

“It has been another see-saw week in markets, as a rally in the first part of the week turned to dust in the second, but China’s rate cut has provided the rationale for a bounce in global stocks to round off the week. Although very much a lone voice crying in the wilderness, the PBoC’s move provided the fundamental basis for a rally in risk assets, reversing some of the mid-week gloom. But the surge in German factory-gate prices and a slump in UK consumer confidence shows that the broader backdrop continues to be quite negative for equities. With US markets already shedding initial gains, the picture remains uncertain.”

Investor sentiment remains weak

“Rally or not, investors are not exactly flooding back into equities. Instead, this will be a short-term bounce that may will use to get out at a better price. And given how quickly the bounce earlier in the week fizzled out, it is likely that caution is set to persist. Next week’s Fed minutes will remind markets that there is more to come from Powell and co, even if the BoE faces a trickier balancing act.”

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