Insights 
VT 
In parallel, US indices are also experiencing upward movement as the European markets wrap up their trading day.
US Market Performance
The Dow Jones Industrial Average rose by 486.55 points, or 1.12%, closing at 44,075, after a 1.23% decline on Friday.
The S&P Index climbed by 1.32% to 6,320.14, following a 1.60% decrease last week.
Moreover, the NASDAQ increased by 359 points, or 1.74%, reaching 21,010.76, after experiencing a 2.34% drop on Friday.
We are seeing a significant rebound in European and US markets today after a sharp sell-off last Friday. The German DAX and US NASDAQ are leading the recovery, but they have not fully erased the losses from the worst trading day since April 2025. This pattern suggests high uncertainty among traders.
Market Volatility Expectations
Last week’s drop was triggered by Eurozone flash inflation data for July 2025, which came in at 3.1%, surprising analysts who expected a figure closer to 2.8%. This immediately raised fears that the European Central Bank might delay its planned interest rate cuts for the autumn. This is a sensitive issue, reminding everyone of the aggressive rate hikes we saw back in 2022 and 2023 to control inflation.
The VSTOXX index, which measures volatility for the Euro Stoxx 50, jumped to over 22 on Friday, its highest level in months, before settling back to around 18 today. This sharp rise and fall in implied volatility creates opportunities for options traders. Selling premium through strategies like iron condors or strangles on indices like the DAX could be profitable if we believe the market will now enter a calmer period.
However, we must remain cautious as this rebound could be temporary. The market may simply be catching its breath before the next major data release, which is the US Consumer Price Index (CPI) report due next week. A high reading there could easily send markets tumbling again.
Therefore, holding some protection makes sense for the coming weeks. We should consider buying cheap, out-of-the-money put options on the S&P 500 or NASDAQ 100. This acts as a hedge against another sudden downturn driven by renewed inflation fears from the US Federal Reserve.
