Morning MoneyBeat Europe: Recent Rally Fades in Europe

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A recent rally in European stock markets faded Tuesday as weak German manufacturing data soured the positive tone.

Early Tuesday, German manufacturing orders dropped 1.8% on the month as orders from outside the eurozone fell 3.7%, a sign that slower growth in China and recessions in other key developing markets are starting to leave their mark on Europe's largest economy.

Europe’s lackluster start occurred despite another stellar performance on Wall Street Monday, with the S&P 500 and DJIA each closing 1.8% higher.

Last week's disappointing U.S. jobs report had fueled worries that weakness abroad could be spilling over into the U.S., cooling expectations for an imminent increase in interest rates, helping stock markets push higher.

"As long as we're in a low interest-rate environment, you have to buy stocks because you're not going to get returns in cash or bonds," said Paul Nolte, portfolio manager at Kingsview Asset Management, which oversees about $100 million.

In Asia, the Nikkei Stock Average closed up 1%, with shares in Japan rising on bets that its central bank may further loosen monetary policy at its meeting this week.

Watch for: Speech by ECB chief Mario Draghi; Ifo survey.

Market Snapshot: FTSE 100 down 0.66%, CAC 40 down 0.58% and DAX down 0.83%. Nikkei closed Tuesday up 1.0%. Brent crude down 0.35% at $49.08. Gold up 0.03% at $1137.90. EUR/USD at $1.1214. Ten-year Treasury yield lower at 2.035%, Bund yield higher at 0.565%, Gilt yield higher at 1.694%.

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