European equities open firmer as French bond jitters fade

• Eurostoxx: +0.2%
• Germany's DAX: +0.6%
• France's CAC 40: +0.7%
• UK's FTSE 100: +0.4%
• Spain's IBEX: -0.6%
• Italy's FTSE MIB: +0.8%

European shares have begun the week on a mildly upbeat note, with the majority of the main benchmarks trading higher as the market shakes off some of last week's selling. French equities are standing out in early action, and the CAC 40 has gained 0.7%.

Bond markets are adding to the brighter tone, with the 10-year yield gap between France and Germany sitting near 161 basis points, compared with a peak of 176 bps last week. The move follows Moody's decision on Friday to keep France's Aa3 credit rating, while leaving the outlook negative. Given the recent anxiety over France's public finances and political instability, that looks like a welcome break for investors.

That is not to say the danger has passed. The yield spread is still well above historical norms, and the deeper fiscal worries have not disappeared. So although the recent market action is reassuring, investors are still a long way from feeling at ease with French assets.

Spain's IBEX is the outlier, down 0.6% at the bell. Spanish companies with big Brazilian operations are feeling the drag from Sunday's presidential vote, in which Lula's surprise win over Bolsonaro set off a sharp slide in Latin American assets. That has put pressure on shares of Santander, Telefónica and Mapfre because of their Brazilian links.

For the week ahead, the calendar is packed for European markets. The Federal Reserve, the European Central Bank and the Bank of Japan are all scheduled to deliver policy decisions, and major technology earnings will present a fresh challenge to confidence. In that earnings wave, attention will focus on artificial-intelligence spending and whether the payoffs can validate the huge outlays.

At least for the moment, European equities have some breathing space at the start of the week. Yet with fixed-income worries still hovering and a number of major risk events ahead, it would be premature to place too much weight on the early gains.