European equities open higher, oil and yields cap gains

European stocks are moving higher at the start of the week, though the upward momentum appears tentative.

• Eurostoxx +0.1%
• Germany DAX +0.2%
• France CAC 40 +0.4%
• UK FTSE +0.3%
• Spain IBEX +0.1%
• Italy FTSE MIB flat

The more striking observation is that European equities are staying in positive territory at all, given the challenging backdrop investors face.

Oil prices are advancing again after Trump turned down Iran's latest bid to reopen the Strait of Hormuz, but talks are expected to continue this week. WTI crude has gained nearly 2% to $94.30, refocusing attention on inflation risks as energy costs remain high.

At the same time, the bond market is not providing any relief. The 10-year Treasury yield is edging back toward 5.20%, as the debate over further Fed tightening continues with US economic data holding up.

Thus, it is the same mix of higher oil and higher yields that threatens the slightly improved opening sentiment.

US futures are also offering little support, with S&P 500 futures sliding 0.4% and Nasdaq futures falling 0.9%.

Given this, the early European gains should not be interpreted as a risk-on signal. As long as oil prices stay high and Treasury yields are poised to rise further, stock gains will be difficult to sustain.