Why stocks roared back after nosedive

A rally in global stock markets lost some of its steam on Wednesday.

European markets posted modest gains in early trading, with benchmark indexes in London, Paris as well as Frankfurt rising by around 0.5%.

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Japan’s Nikkei added just 0.2%, while Hong Kong’s Hang Seng slipped into the red, losing 0.9%.

Both indexes had started off the day strongly. The Nikkei at one point surged as much as 3.4%, while the Hang Seng posted gains as high as 2.9%.

The Asian markets had initially taken their cues coming from Wall Street. After two sessions of heavy declines, the Dow shook off a bad start to close up 2.3% on Tuesday.

nevertheless Wednesday could be another volatile day inside U.S. Dow futures were down more than 220 points, or 0.9% around 3:45 a.m. ET.

Related: Dow roars back for 567-point gain after scary start

Some market watchers have voiced optimism in which the heavy losses at the start of This kind of week were just a blip in a bull run for stocks in which’s set to continue. nevertheless others are cautioning against trying to “buy the dip” for the time being.

“We would certainly resist the temptation of catching a rebound,” said Hao Hong, head of research at Chinese stock broker BOCOM International.

He added in which a combination of high valuations in stock markets as well as rising interest rates around the entire world was the “worst recipe.”

“The market may have (already) seen its high for the first half of 2018,” Hong said.

Losses This kind of week have taken the shine off of a recent rally in Asian stock markets. The Hang Seng hit an all-time record in January, while the Nikkei has recently flirted with levels not seen since the early 1990s.

Tokyo stocks plunged more than 7% over the course of Monday as well as Tuesday, erasing all of their gains for the year so far.

The punishing rout has also pushed key indexes in Germany, Spain as well as Sweden into correction territory, meaning they have dropped 10% or more coming from recent highs.

Related: Here’s what the Dow drop means for you

The mass selling This kind of week was ignited by stronger-than-expected growth in wages inside U.S. in which prompted fears in which the Federal Reserve may have to raise interest rates quicker than initially thought to stave off inflation. in which in turn pushed bond yields higher, draining money out of global stocks.

Some analysts suggest in which despite This kind of week’s misery, 2018 could still be a not bad year for Asian stocks — regardless of what happens inside U.S. market.

Shares inside region are still significantly cheaper than their counterparts inside U.S., according to Kim Iskyan, an analyst at research firm Stansberry Churchouse. He cited a key valuation metric used by investors to compare companies’ stock prices with their expected earnings.

“Asia will be a much better place to be than the U.S. market right at This kind of point,” Iskyan said.

— Charles Riley contributed to This kind of report.

sy88pgw (Hong Kong) First published February 7, 2018: 1:54 AM ET