Looking for signs at the crossroads

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Equity market sentiment faces a key test.

Global equities suffered a 2.6% two-day sell-off last week, leaving the index close to 10% down from the year's peak. The slide reflected continued worries over slowing smartphone sales, along with disappointing earnings from US retailers, and indications of a weakening in the US housing market. The move has left valuations attractive. In emerging markets, on around 11x forward earnings at present, stocks trade at a discount to their 30-year average of 13x. In the Eurozone, they trade at 12x, versus a long-term average of 14x.