European Stocks Fall Amid Weak Wall Street Lead and Middle East Concerns

European stock markets retreated on Tuesday, following the lead of Wall Street as investors reassessed U.S. interest rate expectations and grappled with ongoing tensions in the Middle East and regional economic concerns.

By 03:05 ET (07:05 GMT), Germany’s DAX fell 0.7%, France’s CAC 40 dropped 1.2%, and the FTSE 100 in the U.K. declined 0.9%.

Wall Street’s Weak Performance Weighs on European Markets

European markets followed a weak lead from Wall Street after last week’s strong U.S. jobs report. The data led traders to dismiss the likelihood of another large interest rate cut from the Federal Reserve in November, shifting expectations for the central bank’s monetary policy approach.

Chinese markets, which had been closed for a week-long holiday, also weighed on global sentiment. After reopening, initial sharp gains were quickly pared back as investors grew disappointed by the lack of fresh stimulus measures from Beijing. The Chinese government had introduced a series of economic support measures, including interest rate cuts, before the holiday, but investors were hoping for additional steps.

German Industrial Production Rises, But Broader Weakness Persists

In Europe, the economic calendar is relatively light, but German industrial production grew 2.9% in August, beating expectations of a 0.8% increase. However, on an annual basis, production was still down 2.5%. This follows Monday’s data showing a 5.8% monthly drop in German factory orders, while eurozone retail sales increased only 0.2% in August.

With inflationary pressures easing, the European Central Bank (ECB) is expected to continue its policy easing next week. The ECB has already cut rates twice this year. Bundesbank President Joachim Nagel indicated that he is open to considering another interest rate cut, as Germany’s economic growth outlook for the second half of the year remains weak.

Crude Oil Prices Slip After Rally

Oil prices fell on Tuesday as traders took profits after a strong rally driven by concerns that the Middle East conflict could disrupt oil supplies.

By 03:05 ET, Brent crude slipped 1.5% to $79.72 per barrel, while U.S. West Texas Intermediate (WTI) crude futures dropped 1.5% to $75.95 per barrel. Both benchmarks gained more than 3% on Monday, hitting their highest levels since late August, building on last week’s 8% rally, the largest weekly gain in over a year.

Later today, traders will be watching the American Petroleum Institute’s (API) U.S. crude oil inventory report. Analysts expect an increase of 1.9 million barrels in stockpiles.