With less than 10 minutes to go, Wall Street is on track to end firmly higher.

Traders on the floor of Wall Street look a little cheerier today, as they watched shares rise rather than slide...

Wall Street traders are licking their wounds tonight after a bruising few days, which has knocked 5% off the Dow.

That sharp decline, after a series of record highs of late, is making some investors reassess the health of the markets.

But did the fall go too far? Some analysts are predicting better times ahead, at least in the short term.

As Marketwatch puts it:

Late-Thursday stock trading was characterized by powerful gyrations amounting to hundreds of points that took place within minutes. The Journal reported the Dow tumbled about 240 points in the final 90 minutes of trade, representing about half of Thursday’s losses.

However, some technical analysts make the case that the market has reached an oversold condition, where further declines may not be justified.

“We’re certainly expecting a bounce in the short term,” wrote Justin Waltes, co-founder of research firm Bespoke Investment Group, in a Thursday report.

However, he warned that “it’s the longer term that we’re more concerned about now given the technical breakdown we’ve seen. Expect a rally soon, but don’t go loading up on cyclicals with the expectation that the pain is over once we bounce. There is likely more volatility to come in the weeks ahead.”

Back in the UK, the chairman of cake and cafe chain Patisserie Valerie has dipped, deep, into his pocket to keep it afloat.

Entrepreneur Luke Johnson (whose future columns for the Sunday Times are eagerly awaited) is putting £20m into the company, as a loan.

This follows the alleged “fraudulent activity” revealed this week that has left the business’s future in serious doubt.

At least two of its shops closed today, and finance director Chris Martin was arrested.

Technology, consumer goods and basic materials companies are all pushing the Dow higher today.

Credit card firm Visa is the top riser, up 3.6%, followed by Walgreen Boots (+3%), then three tech firms - Cisco, Microsoft and Apple all up around 2%.

But energy firms Chevron and Exxon are lagging, down over 1% each. That’s because the number of US oil rigs has jumped, according to new figures today, suggesting suppliers are trying to boost output.

Wall Street is still managing to rally, though. Just.

The Dow is currently up 90 points, or 0.37%, on track for its first gain after six days of losses.

Tech stocks are recovering, pushing the Nasdaq up by 109 points or 1.5%.

The European stock market rally is running out of steam!

After a strong start, the major indices are heading back to earth as the closing bell approaches.

The FTSE 100 is now up only 9 points, or 0.1%. Germany and France are also subsiding.

David Madden of CMC Markets thinks traders are keen to protect themselves from any more volatility on Wall Street tonight (where stocks are still higher)

The equity markets got off to a strong start following a mixed session in Asia, but now the gains are evaporating as we approach the close. Traders are keen to square up their books ahead of the weekend. The global equity rout originated in the US, and the moves continue to be US driven, and European dealers are keen to cash in their holdings as Wall Street still has several hours more trading left.

The pound has lost ground today, as traders continue to watch Brexit developments nervously.

The UK government is currently trying to reassure sceptical MPs, and ministers, over a proposed backstop arrangement that could effectively keep the whole UK inside the customs union.

Downing Street insists that it would never agree to an ‘indefinite’ backstop, in an attempt to placate Brexit-supporting MPs who insist on a clean break with the EU.

But with time running out, the pound has lost half a cent against the US dollar to $1.318.

Ursula Johnston, head of customs, Gowling WLG, warns that such an arrangement may not would actually deliver frictionless trade. That’s a crucial issue, as the government begins work on turning motorways in Kent into parking lots for lorries after Brexit...

She explains:

The UK newspapers are filled today with reports of Theresa May closing in on a deal with the EU whereby the whole of the UK would remain in “a”, or, “the” customs union with the EU for an indefinite period. This is on the face of it promising news for those that would like the UK to keep the closest possible trading ties with the EU without being a member of the Single Market. The concept of a UK – EU customs union seems to offer the holy grail of frictionless trade and providing a workable solution to the Irish border conundrum.

However what has not been clarified, as yet, is whether the UK would remain part of the Customs Union and trade with the EU-27 as it does today i.e. no customs administrative requirements or whether the UK will form a new customs union with the EU. Should the UK and EU agree on a new customs union arrangement with the EU this will eliminate tariffs but does not mean no customs administration and paperwork. There will highly likely still be a requirement to file a declaration that the goods are in UK or EU free circulation and provide a customs value and classification for those goods. This is not frictionless trade as some would no doubt envisage. It offers a trading arrangement for customs purposes that is closer to a free trade agreement without delivering any of the wider benefits.

Bernardine Adkins, head of EU trade and competition law, Gowling WLG, is more scathing about the government’s plans:

The guidance published today is pure fantasy. The government say that they will “seek to bring into force bilateral UK-third country agreements from exit day, or as soon as possible thereafter”. There is no mention that the UK is currently unable to negotiate bilateral deals, so there is absolutely no possibility of bilateral agreements being in place on exit day. Worse still ‘as soon as possible thereafter’ will be the time it takes to negotiate deals – this is at least 5 years if not longer. That’s at least 5 years in which UK businesses will face increased costs for customs clearance and compliance.

Today’s guidance on free trade agreements is telling. It grossly underestimates the time it takes to negotiate free trade deals, and glibly notes that ‘there may be practical changes’ to how current users of EU free trade agreements will deal with third countries. Importantly, however, the government has dropped its fantastical stance of simply rolling over EU free trade agreements on exit day. The problem is that there is no viable option to avoid increased tariffs or other impediments to trade in a no deal scenario.

Stephen Mnuchin has also played down the suggestion that China could dump its holdings of US government debt.

He claimed such a move would be costly for Beijing, and that there’d be plenty of other buyers anyway.

Wall Street traders have woken up in a better mood ....

Stock markets in emerging economies are recovering some ground today, after suffering their biggest fall in two years on Thursday.

The MSCI index of developing market stocks has jumped by 2.2% today, led by Taiwan (up 2.4%), India (+2.1%), the Philippines (+1.75%) and South Korea (+1.5%).

Here’s Reuters take:

Those moves tracked a general improvement in appetite for risk among investors globally, with developed world stock markets recovering after a dramatic two-day slide on Wall Street.

“We’re seeing a bit of a rebound in EM stock markets today...we saw a similar occurrence earlier this year when U.S.stocks came under pressure and that automatically improved, and that might be what we’re seeing this time around as well,” said Jason Tuvey, senior emerging markets economist at Capital Economics.

US tech stocks may have a better day too...

Investors should be wary before diving back into the market today, argues Peter Dixon of Commerzbank.

He writes:

The sharp correction in stock markets in the last couple of days should be seen as a warning shot against the market complacency which has been one of the predominant themes of the last 12 months. Indeed, measures of equity volatility continue to suggest that investors are underpricing risk.

We pointed out at the start of the year that equity investors appeared to be increasingly reluctant bulls and were driven more by the FOMO factor (fear of missing out) than the fundamentals, and advised investors to take risk off the table.

Dixon points out that shares still look pricy, even though the Footsie has shed almost 10% since the start of the year.

Having enjoyed a great run since March 2009, with global equities having generated returns of 300%, it is difficult to imagine that there is much more juice to be squeezed out of the lemon. On a conventional valuation basis, long-term P/E ratios suggest that equities are extremely expensive.

The cyclically adjusted P/E (CAPE) popularised by Robert Shiller suggests that the S&P500 has only once been more overvalued than it is today – the late-1990s tech boom – on a dataset going back 130 years:

Despite today’s recovery, stock markets are heading for their worst week since February, Reuters points out.

The markets are breathing a sigh of relief this morning, says Rebecca O’Keeffe, Head of Investment at interactive investor.

But while some investors are piling back into shares, others are being more cautious.

Trade wars, rising interest rates and slowing growth have been front and centre in terms of big macro reasons for the rout, but the reality is that investors need to be asking whether valuations can be justified by company profits or have markets got ahead of themselves?

The start of the US earnings season sees JP Morgan, Wells Fargo and Citibank all reporting today, and good results could provide the catalyst that sees markets recover their recent losses, while disappointing numbers are likely to jeopardise any positive sentiment.

In another sign of easing tensions, the Vix volatility index has dropped this morning.

The VIX is now hovering at 21.74% this morning, down from Thursday’s eight-month high of 25% yesterday.

Reports that the leaders of US and China could hold fresh talks over trade next month are also helping the markets shake off their losses.

Mike van Dulken of Accendo Markets explains:

The Washington Post reported Trump and Xi agreeing to a side-lines meet at next month’s G20 summit, fuelling hopes for a trade war truce to offset rising bond yields mounting pressure on the US economy.

Global markets have calmed down overnight, says Kit Juckes of French bank Société Générale.

His morning note to clients is titled “A day off for the horsemen of the apocalypse?”, suggesting he expects less drama today...