European Stock Markets Retreat

European stock markets retreated Tuesday, tracking overnight weakness on Wall Street. Investors reassessed the path of US interest rates, the Middle East conflict, and regional economic weakness.

At 03:05 ET (07:05 GMT), the DAX index in Germany traded 0.7% lower, the CAC 40 in France fell 1.2%, and the FTSE 100 in the U.K. dropped 0.9%.

Weak Lead from Wall Street

The main European indices received a weak lead-in from Wall Street after a strong US jobs report. This prompted traders to discount another outsized rate cut from the Federal Reserve at its next meeting in November.

Investors were disappointed with the return of the Chinese markets post-holiday as sharp gains were quickly pared back due to a lack of concrete stimulus measures from Beijing policymakers. Before the Golden Week holiday, the Chinese government had rolled out several stimulus measures, including interest rate cuts, and investors had hoped for more.

German Industrial Production Rises

In Europe, the economic calendar is relatively light, although German industrial production rose 2.9% in August, better than the expected 0.8% gain. However, this figure was still down 2.5% year-over-year and followed data released on Monday showing German factory orders slumped 5.8% month-over-month. Eurozone retail sales gained only 0.2% month-over-month in August.

The European Central Bank (ECB) is set to meet next week, expected to ease policy further after already cutting rates twice this year as inflationary pressures eased. Bundesbank President Joachim Nagel expressed openness to considering another ECB interest rate cut at the upcoming meeting, noting weaker economic growth in Germany for the second half of the year.

Crude Slips After Strong Gains

Oil prices fell Tuesday as traders took profits after a strong rally, driven by concerns that an all-out war in the Middle East could impact supplies.

By 03:05 ET, Brent crude slipped 1.5% to $79.72 per barrel, while U.S. crude futures (WTI) traded 1.5% lower at $75.95 per barrel. Both contracts had risen over 3% on Monday, reaching their highest levels since late August, adding to last week's rally of 8%, the biggest weekly gain in over a year.

Away from the Middle East, the latest U.S. crude oil inventory data from the American Petroleum Institute is expected later, with analysts forecasting stocks to rise by 1.9 million barrels.