European shares open lower as bond yields stay elevated

• Eurostoxx down 0.5%
• Germany's DAX dropped 0.6%
• France's CAC 40 slipped 0.7%
• UK FTSE fell 1.2%
• Spain's IBEX lost 1.0%
• Italy's FTSE MIB declined 0.7%

The new month begins with European equities broadly lower, as benchmark indexes in Britain and Spain suffer the steepest drops at the start of trading.

Bond markets continue to be the core concern. Earlier today, the 10-year Treasury yield hit 5.31%, a level last seen in 2007, and currently sits near 5.30%. This keeps financing costs uncomfortably high for stocks after Treasuries posted their weakest quarterly performance since 1994.

Consequently, European equities find little reassurance from recent broader market moves.

Oil also moved lower earlier in the day, with WTI crude briefly falling under $89 before recovering to $90.87. This underscores that inflation worries tied to high energy costs are still present.

The same mix of climbing oil prices and rising bond yields is once again weighing on equity markets.

One positive is a clear divergence in the technology sector. Micron's solid earnings boosted AI-linked shares in Japan and South Korea overnight, while US futures are holding steady. S&P 500 futures have gained 0.5% and Nasdaq futures are 1.1% higher as European trading begins.

Nonetheless, the overall risk appetite remains cautious. In my view, Micron's earnings offer some initial optimism, but equities are still exposed to further selling pressure unless the bond selloff shows clearer signs of stabilisation.