European markets open higher to start the week but thin liquidity argues for caution

• Eurostoxx up 0.5%
• Germany's DAX higher by 0.4%
• France's CAC 40 up 0.4%
• The UK's FTSE adds 0.5%
• Spain's IBEX climbs 1.2%
• Italy's FTSE MIB rises 0.7%

Across Europe, investors are arriving at their desks with risk appetite in positive territory this morning, and Spain's benchmark is the standout gainer in early trading. The broader tone is fairly upbeat, though there is not much reason to overinterpret the initial advance just yet.

One thing to keep in mind is that the US begins the new week with a partial market closure. Wall Street's stock session will still take place later, but the bond market will stay shut. That leaves traders and investors without one of the most important market signals to lean on, especially given that the run-up in Treasury yields has been a major force behind the recent pressure on risk sentiment.

Beyond that, thinner-than-normal liquidity could make price moves more exaggerated across the board in the session ahead. So the early strength does not necessarily signal much conviction on the part of investors.

For now, the overall risk mood is steadier, showing at least some mild optimism. US futures are pointing up too, with S&P 500 futures and Nasdaq futures both 0.2% higher.

Looking further into the week, though, there is plenty of reason for markets to turn more cautious. Wednesday's US CPI report stands out as the key risk event, and it could play a decisive role in whether Treasury yields can climb further. A hotter-than-expected reading would make life more difficult for stocks, especially if it reinforces expectations that the Fed may have to push interest rates up further.

Against that backdrop, the positive open can be seen as a welcome breather for markets. Whether it becomes something more durable will depend on how the bond market behaves when it returns tomorrow and, above all, on how the US CPI report lands on Wednesday.