Oil tumbles 4 percent, drags stocks lower again

European stock markets fell on Monday as oil prices reversed earlier gains to tumble 4 percent, while weak business sentiment numbers from Germany highlighted growing concerns about the outlook for the global economy.

The pan-European FTSEurofirst 300 index . FTEU3, which rose 3 percent on Friday to mark its first weekly gain for 2016, fell 0.8 percent in early trade. Crude oil prices tumbled 4 percent on persistent worries about oversupply and profit-taking, reversing early gains. That followed a 10 percent surge on Friday on short-covering and fuel demand triggered by freezing weather in parts of the northern hemisphere. Still, with oil prices holding above $30 a barrel, world stock markets remained above multi-year lows hit last week.

Risk aversion amid fears of a China-led global economic slowdown and oil prices sinking to 13-year lows have rocked global markets this month. German business morale fell to an 11-month low in January, a survey showed, suggesting growing concern among company executives in Europe's largest economy as emerging markets slow and financial markets get off to a jittery start in 2016. The Ifo survey reading of 107.3 compared with 108.6 in December and was well below 108.4 forecast in a Reuters poll. Market turbulence sets the backdrop for a meeting of the U.S. Federal Reserve on Tuesday and Wednesday, while Bank of Japan policymakers gather on Jan. 28-29. Last week, the European Central Bank signalled it could deliver further monetary stimulus, raising hopes that other central banks might take the same path. The market rout meanwhile could throw the Fed off its course of gradual interest rate hikes. "Attention will now turn to the U.S. Federal Reserve and the Bank of Japan's latest policy decisions later this week, with the main focus on the U.S. central bank in the wake of last month's historic decision to raise rates for the first time in nine years," said Michael Hewson, chief market analyst at CMC Markets.