World shares inched higher led by Europe on Monday, after last week’s rout in US technology stocks that saw $2.3 trillion in value wiped off in two days with investors taking note of lofty valuations when the global economy is still in a recession.

Market activity was likely to remain subdued for the rest of the day with the US closed for the labour Day holiday, though Nasdaq futures fell a further 1%.

“This market rally may likely pause given stretched valuations,” said Stephane Ekolo, an equity strategist at TFS Derivatives in London. “If earnings do not improve materially, investors might well need to buckle up and expect a correction.” European bourses, which have fewer technology stocks compared with the United States, started the week in the black, driven by a 1.6% gain in Germany’s DAX and London’s FTSE 100.

UK bluechip stocks, many of which derive much of their profits overseas, were also helped by a falling pound, with Brexit talks plunging into crisis following Britain’s threat to override its EU divorce deal. Sterling fell around half a per cent against the dollar and euro on Monday.

“It is almost inevitable that the perceived probability of ‘no deal’ will escalate over the coming weeks,” Goldman Sachs analysts wrote in a note.

The tech sell-off showed no signs of abating as Tesla, the poster child of the euphoria in US big technology stocks, fell 4.5% in Frankfurt after it was excluded from a group of companies that were being added to the S&P 500.

US-heavy MSCI world shares index was up 0.3%. The index had hit a record high last week, driven by unprecedented central bank stimulus, but the rally fizzled out last week amid worries over heady valuations and a patchy economic recovery.

Euro zone bond yields ticked higher on Monday on signs of an improved global economy and ahead of a week of healthy supply, as countries get to grips with increased borrowing requirements to help fund the response to the COVID-19 crisis.

China’s exports rose the most in nearly 1-1/2 years in August, data showed, a sign that more of its trading partners — such as the euro zone — are reopening their economies and are on the mend.

Also on Monday, data showed German industrial production rose 1.2% in July from the prior month, a sign that Europe’s “engine room” is recovering from the depths of recession.

“Even if industrial production remains unchanged for the next two months, the quarterly growth rate would still be around 10%. This illustrates that a strong rebound in the German economy is in the making,” said Carsten Brzeski, ING’s chief economist for the euro zone.

In addition, more than 17 billion euros of supply is due later this week with Austria, the Netherlands, Germany, Portugal and Italy all selling debt in auctions.

Italy has hired a syndicate of banks to sell a new 20-year bond, the Treasury said in a statement. It said the new bond will be launched “in the near future subject to market conditions,” a phrase usually used a day before a sale. Ireland and Spain are also potential issuers, according to analysts.

On Monday, Luxembourg raised 1.5 billion euros via the first government “sustainability” bond sale in Europe.

Italian bond yields were higher across the curve with the 10-year yield up 3 basis point at 1.12%, while benchmark German 10-year bond yields rose one basis point to -0.46%.

The upward move in yields could be checked closer to the European Central Bank meeting on Thursday, if the signs are that policymakers are unimpressed by the indications of an economic recovery and flag further stimulus.

The mood across Asian markets was tentative. MSCI’s broadest index of Asia-Pacific shares outside Japan was last down 0.2% after two straight days of losses toppled it from a 2-1/2-year peak last week.

Data earlier on Monday showed Chinese imports fell 2.1% in August from a year earlier, confounding expectations for a 0.1% increase, in a sign of sluggish domestic demand. Exports jumped by a larger-than-expected 9.5%.

Japan’s Nikkei fell 0.5% with SoftBank coming under heavy selling pressure following media reports it has spent at least $4 billion buying call options on listed US technology stocks.

In currency markets, the dollar index gained 0.1% in holiday-thinned trade on Monday, while traders shifted their focus to the European Central Bank’s meeting on Thursday. Most analysts don’t expect a change in policy stance.

The dollar was flat against the yen at 106.28 ahead of a heavy week of macroeconomic data with figures on household spending, current account and gross domestic product due on Tuesday.

The message the ECB will deliver on its inflation forecasts is likely to set the direction for the euro, which has surged in the past few months.

In commodities, oil prices hit their lowest since July, after Saudi Arabia made the deepest monthly price cuts for supply to Asia in five months. US crude fell 1.3% to $39.25 a barrel. Brent crude skidded to $42.11.

Gold eased on Monday as the dollar made gains, although economic uncertainties kept it from falling further as investors awaited developments from central banks.

Spot gold was down 0.2% to $1,928.44 per ounce at 10:24am, while US gold futures were little changed at $1,933.60., with U.S. markets shut for the Labor Day holiday.

“A higher dollar is weighing on gold, while longer-term uncertainties still persisting in the market is putting a floor under prices,” Carsten Menke, analyst at Julius Baer, said.

Agencies