- Eurostoxx +0.5%
- Germany DAX +0.4%
- France CAC 40 +0.4%
- UK FTSE +0.5%
- Spain IBEX +1.2%
- Italy FTSE MIB +0.7%
It’s a positive mood all around as European investors get to their desks this morning, with Spain’s benchmark index leading gains in the early stages. The broader market mood is looking relatively upbeat, although I wouldn’t read too much into the early advance just yet.
As a reminder, we are dealing with a partial market closure in the US to start the new week. Wall Street will remain open for business later but the bond market will be closed. That means traders and investors will be without one of the most important market signals to work with, especially as the surge higher in Treasury yields have been a key driver weighing on risk sentiment in recent weeks.
Besides that, thinner liquidity conditions could also exaggerate price movements across the board in the day ahead. So, the early gains may not necessarily signal much conviction among investors.
For now though, the overall risk mood is steadier and reflecting some mild optimism at the very least. US futures are also pointing up with both S&P 500 futures and Nasdaq futures higher by 0.2%.
But looking to the week ahead, there is reason for markets to adopt a more cautious mood in the days to come. The US CPI report on Wednesday is the key risk event to be mindful of, which could be pivotal in determining whether Treasury yields have another leg higher to go. A hotter-than-expected report would certainly make things dicey for stocks, especially if they reinforce expectations that the Fed may have to raise interest rates further.
As such, I would treat the positive open here as a welcome breather for markets. But whether or not this turns into something more concrete will depend on what happens when the bond market returns tomorrow and more importantly, how the US CPI report lands on Wednesday.
This article was written by Justin Low at investinglive.com.