European stocks climbed Monday, as Italian stocks charged up and as investors set aside this weekend’s acrimonious Group of Seven meeting in Canada.
Italy’s benchmark rose after the country’s new finance minister offered reassuring comments about the eurozone.
Investors are watching for news from Singapore, where U.S. President Trump is scheduled to meet North Korean leader Kim Jong Un in an unprecedented summit.
How markets are performing
Italy’s FTSE MIB index I945, +2.19% surged 2.2% to 21,831.21, with that move wiping out Friday’s slide of 1.9%.
Investors also snapped up Italian debt, driving down the yield on Italy’s 2-year note TMBMKIT-02Y, -30.10% by 45 basis points to 1.15%, according to Tradeweb. Yields fall when bond prices rise. The yield on 10-year bond TMBMKIT-10Y, -6.54% fell 20 basis points to 2.91%.
The pan-European Stoxx Europe 600 Index SXXP, +0.51% picked up 0.5% to 387.00. All sectors rose, led by the basic materials and telecommunications groups. On Friday, the index fell 0.2% and ended last week lower by 0.5%.
In London, the FTSE 100 UKX, +0.89% added 0.7% to 7,738.54, aided by a drop in the pound.
The euro EURUSD, +0.0935% moved up to $1.1800 from $1.1771 late Friday in New York.
What’s driving markets
Italian stocks and bond prices leapt as Italian Economy Minister Giovanni Tria said the country’s new government is committed to the euro, according to an interview with Italian newspaper Corriere Della Serra published Sunday. That appeared to allay fears that Italy’s new antiestablishment coalition government — led by the 5 Star and the League parties — would ditch the shared currency.
“The position of the government is clear and unanimous. There is no discussion about leaving the euro. The government is determined to prevent any emergence of market conditions that would lead to leaving the euro,” Tria said, according to a translated version of the interview on the newspaper’s website.
Tria also confirmed the government’s goal of decreasing Italy’s debt this year and in 2019, which helped lift Italian bank stocks. Italy’s public debt exceeds 130% of gross domestic product.
Investors appeared to brush off the G-7 meeting in Quebec, where the U.S.’s relationship with its long-running allies continued to deteriorate. Trump withdrew his support for the group’s communique after Canadian Prime Minister Justin Trudeau repeated his criticism of U.S. tariffs on Canadian metals.
Fair Trade is now to be called Fool Trade if it is not Reciprocal. According to a Canada release, they make almost 100 Billion Dollars in Trade with U.S. (guess they were bragging and got caught!). Minimum is 17B. Tax Dairy from us at 270%. Then Justin acts hurt when called out!
— Donald J. Trump (@realDonaldTrump)
Trump is now preparing for his face-to-face meeting with Kim, the first between a sitting U.S. president and a North Korean leader, which is scheduled for Tuesday at 9 a.m. Singapore time, or 9 p.m. on Monday Eastern Time.
This week, there will be plenty of action from the monetary policy front. The U.S. Federal Reserve is widely expected to increase interest rates on Wednesday, and the European Central Bank expected to discuss when it will begin to end its bond-buying program at its meeting Thursday in Riga, Latvia.
What are analysts saying?
“Thankfully, there is more optimism about the U.S. president’s meeting with North Korean leader Kim Jong Un in Singapore. Potential for a meaningful discussions about denuclearization on the Korean peninsula could [defuse] some of the tensions between U.S. and North Korea, improve the global mood and gain Trump some brownie points after this weekend’s events at the G-7”, said Accendo markets analysts Mike van Dulken and Artjom Hatsaturjants in a Monday note.
Stocks to watch
Daimler AG DAI, -1.79% fell 1.1% after German weekly Bild am Sonntag reported late Saturday that Germany’s Federal Motor Transport Authority found five illicit software-functions that allegedly manipulate emissions-testing.
Which economic data is in focus?
Factory output in the U.K. fell by 1.1% in April, the steepest monthly pace since 2012, suggesting the weakness the British economy experienced in the first quarter has extended into the second. The decline may add to doubts that the Bank of England will raise interest rates again this year.
The pound GBPUSD, -0.4325% fell after the report, buying $1.3368 compared with $1.411 last Friday in New York. But sterling’s fall helped the FTSE 100 move higher intraday, as pound weakness can bolster revenue made overseas by multinational companies.
The Turkish economy grew by 7.4% in the first quarter, beating forecasts, official data showed Monday.