European shares rise at open as bond yields retreat before US jobs data

• Eurostoxx up 0.4%
• Germany DAX climbs 0.4%
• France CAC 40 gains 0.4%
• UK FTSE adds 0.2%
• Spain IBEX rises 0.1%
• Italy FTSE MIB edges up 0.1%

European stocks opened slightly firmer, although the early gains should not be overinterpreted.

Gains are broad-based, with German and French benchmarks leading so far. This comes as bond market pressure eases after the sharp sell-off earlier this week.

The 10-year Treasury yield retreated from yesterday's high of 5.34% to around 5.25%. In Europe, the 10-year German bund yield fell to 3.48% today, well below Monday's high near 3.65%. This provides some breathing space for equities, although yields are still high enough to weigh on risk appetite.

US futures indicate modest gains ahead of the open after a volatile session yesterday. S&P 500 futures rise 0.3% and Nasdaq futures gain 0.4%, but the bigger test remains the US jobs report later today.

Markets expect non-farm payrolls to increase by about 90K in September, with the unemployment rate seen steady at 4.1%. However, wages may be the key figure for investors to watch.

The danger now is that a stronger wage print alongside resilient payrolls could quickly revive calls for another Fed rate hike and spark another breakout in yields. That could damage risk sentiment and hit equities in the aftermath of the report ahead of the weekend.

Thus, even though European stocks have made a better start, caution is warranted as yields remain high and the NFP report is pending. This gives the early gains a fragile quality.