European shares fall at open on bond yield fears and political jitters

• Eurostoxx -0.7%
• Germany DAX -0.7%
• France CAC 40 -0.3%
• UK FTSE 100 -0.3%
• Spain IBEX -0.2%
• Italy FTSE MIB -0.7%

European equities are off to a worrying start, with the sell-off seen on Monday threatening to carry over into Tuesday. Investors are contending with an uncomfortable cocktail of political instability, rising bond yields and worries over the global economy.

The situation in France continues to dominate conversations, even if the CAC 40 is faring slightly better than its regional peers early on. Weekend unrest has piled further pressure on the government's finances, and the spread between French and German 10-year yields has widened to roughly 147 basis points this week.

That remains one of the key risks for European markets at present. A full-blown debt crisis does not have to materialise for problems to emerge.

Wall Street rebounded on Monday, but the bounce has done little to lift the mood as trading shifts to the new day. US futures are subdued, with S&P 500 futures 0.1% higher and Nasdaq futures down 0.2%. That suggests lingering unease over AI stock valuations and elevated Treasury yields remains in place.

In the bond market, 10-year Treasury yields are hovering around 5.12%, staying a touch higher in the early part of the week. The focus now is on whether yields can stabilise and give equities some relief. If not, even a stronger recovery in US tech stocks may not be enough to shift sentiment.