European stocks drop amid China stimulus disappointment and rising oil prices

European stocks declined after China’s rally slowed, following a disappointing lack of new stimulus measures. The Stoxx 600 index fell 0.8%, driven by losses in sectors heavily tied to China’s economy, such as mining and luxury goods. Kering SA and Burberry Plc both dropped over 5%. Investors were let down after China’s National Development and Reform Commission failed to announce fresh economic measures, despite pledging to meet targets. A gauge of Chinese stocks in Hong Kong also plunged, marking its largest intraday decline since 2008.

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US markets followed suit, with the S&P 500 falling 1% after a four-week winning streak. This was largely triggered by a tech stock selloff and bets on a smaller rate cut by the Federal Reserve. Friday’s strong jobs report continued to weigh on Treasuries, with the 10-year yield exceeding 4%. Investors increasingly speculate that the Fed may hold rates steady if economic data remains strong, while geopolitical tensions further complicate the market outlook.

In the Middle East, escalating conflicts contributed to rising oil prices. Brent crude surged to its highest price since August amid fears of potential disruptions to Iran’s oil infrastructure. The ongoing war in the region has unnerved markets, with Israel intercepting rocket attacks near Tel Aviv, and speculation growing that the conflict could impact global oil supplies. Analysts warned that geopolitical risks could trigger a shift toward defensive assets, but caution remains around sectors already considered overvalued.