LONDON (ShareCast) - (ShareCast News) - European bourses are continuing to trade lower, but are off their worst levels of the session, as rattled traders wait on the Wall Street open to see if the 'other shoe' might be about to drop.
Most market commentary was attributing Monday's sell-off in stocks to recent signs of life in government bond yields and the strong US non-farm payrolls report published on 2 February that prompted fears that the Federal Reserve's policymakers might need to hike rates by more than previously anticipated.

However, analysts at Bank of America-Merrill Lynch were not completely on board with that notion.

"While concerns over rates risks are the common narrative, rates vol remains remarkably subdued. Rather, the largest shocks look more driven by positioning in equities and short equity vol, which generated the largest rise in VIX futures in history," they told clients.

Against that backdrop, as of 1148 GMT the pan-European Stoxx 600 index was down 2.19% to 373.62, while the DAX was 2.06% lower at 12,425.67 albeit well off its intraday lows which saw it shed more than 3%. The CAC 40 in Paris was down 2.15% at 5,172.32, the FTSE MIB in Milan lost 1.93% to 22,380.78.

On the bullish side of opinions following the market rout, Emmanuel Cau at JP Morgan said: "Global equities did not experience any material weakness for nearly two years, valuations have become stretched and technical, positioning and sentiment indicators all flashed red in recent weeks.

"The unwinding of this extreme bullishness could have a bit more to go in the near term, but our view is that the medium term fundamental backdrop remains supportive and that one should indeed use the recent dip as buying opportunity."

Meanwhile, in a typical flight-to-safety move, the yield on the benchmark 10-year German bund was falling by seven basis points to 0.67%.

Overnight, the Dow suffered its biggest points loss ever for a single session, plunging 1,175 points to close at 24,345.75 even after having pared an intraday drop of nearly 1,600 points intraday. Declines in the S&P and the Dow were their biggest declines since August 2011, while in Asia it was a similar picture overnight, with the Nikkei and Hang Seng both down more than 4.5%.

Mimicking the parabolic rise seen in the Chicago Board of Options Exchange's volatility index, or VIX, the day before, come Tuesday the VStoxx index of volatility for the Eurostoxx 50 index was 56.83% higher to 29.57 points.

Corporate-wise, stock in Credit Suisse was in focus given its exposure to financial instruments inversely linked to levels of equity volatility.

"In response to certain media enquires, Credit Suisse confirms that it has experienced no trading losses from Velocity Shares Daily Inverse VIX Short Term ETNs due December 4, 2030," the investment bank said in a statement.

Elsewhere, according to the FT Accor was near to selling its real estate arm.

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