(Bloomberg) -- European stocks closed near a six-week low on Monday as worries about higher-for-longer interest rates snuffed out earlier gains with US bond yields climbing to their highest since 2007. 

The Stoxx 600 was little changed by the close after earlier rising as much as 0.9%. The US 10-year Treasury yield rose to a 16-year high, as the economy’s sustained resilience spurs investors investors to position for extended period with interest rates at elevated levels. Mixed policy signals from China had also weighed on sentiment earlier in the session.

Real estate and construction stocks led declines in Europe, while luxury outperformed following a China-led slump last week.

Among other individual movers, embattled Swedish landlord sank SBB after the firm said its chief financial officer would be leaving. Payments company Adyen NV extended last week’s post-earnings slump, as more analysts downgraded the stock or slashed its price target.

This year’s European equity rally has paused this month amid turmoil in China’s property and shadow banking sectors, while signs of resilience in the US economy have fanned worries that borrowing costs will have to remain high to cool demand. The Stoxx 600 is nearing technical oversold territory, although it remains in the range that’s been in place since April. 

Focus turns now to the Kansas City Fed’s annual symposium in Jackson Hole, where economists and investors will pore over an address by Federal Reserve chief Jerome Powell on Friday for clues to the central bank’s policy outlook.

“Global risk sentiment is less than ideal as healthy economic data from the US and darker clouds over China cast a shadow on both stock and bond markets,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. 

Still, “the fear of a decidedly hawkish Fed is already priced in, and if there is no more hawkish surprise from this week’s Jackson Hole meeting, tensions among investors could ease by next week, and give markets some breathing room,” Ozkardeskaya said.

For more on equity markets:

  • ‘Perfect Storm’ Puts This Year’s Gains at Risk: Taking Stock
  • M&A Watch Europe: GAM, TruFin, SBB, Return of the Summer Lull
  • US Stock Futures Unchanged

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--With assistance from Michael Msika.

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