NEW YORK, U.S. - On Monday, as politics took center stage, investors shrugged off the weekend’s G7 trade drama, and focused on Tuesday’s highly anticipated meeting between the U.S. President Donald Trump and the North Korean leader Kim Jong Un.
Ahead of what is being dubbed the most highly anticipated diplomatic meeting in over a decade, on Monday investors felt optimistic that the meeting will reinforce relations between North Korea and the West after Trump said he feels “very good” about his upcoming meeting.
Apart from the crucial meeting on Tuesday, investors are also anticipating the interest rate changes that the world’s biggest central banks will make this week.
On Wednesday, the Federal Reserve is expected to wrap up a two-day meeting on interest rates.
It is expected to raise interest rates from their current level of 1.75 percent to 2 percent as it seeks to normalize monetary policy with the U.S. economy showing signs of health.
A day later, the European Central Bank is poised to hold formal talks after a briefing from President Mario Draghi on ending its bond-buying program.
Then, on Friday, the Bank of Japan will meet over June monetary policy decision, but no change to policy is expected.
Further, the week ahead is also set to be a testing time for U.K. Prime Minister Theresa May, who faces crucial votes on Tuesday, that could derail her Brexit policy.
Early on Monday, shares in Japan, Hong Kong and South Korea showed modest advances and Chinese stocks underperformed.
While Australian markets remained shut, Canada’s dollar decreased 0.4 percent to C$1.2984 per U.S. dollar in the wake of the explosive G7 meeting, that saw the U.S. President slamming the Canadian Prime Minister Justin Trudeau over America’s recently imposed trade tariffs.
Meanwhile, European markets closed broadly higher.
Core European bonds slipped, even as the Stoxx Europe 600 Index increased 0.7 percent, its largest climb in more than a week.
After Italy’s new finance minister announced that the country's new populist government isn't considering leaving the eurozone or adding to the high public debt load, the euro climbed 0.1 percent to $1.1784 and Italian bonds and stocks jumped.
Italy's main stock index jumped 3.4 percent.
Germany's DAX rose 0.6 percent.
France's CAC-40 index rose 0.4 percent.
However, the British pound fell 0.2 percent to $1.3374 and data showed a slump in U.K. manufacturing.
The S&P 500 Index rose 0.4 percent as of 1:35 p.m. New York time, with almost all sectors gaining.
Meanwhile, amid preparations for the meeting between Donald Trump and Kim Jong Un in Singapore, U.S. stocks rose higher in mid-day trading on Monday.
The Dow Jones industrial average added 57 points, or 0.2 percent, to 25,372 as of 12:30 p.m. Eastern time.
The Standard & Poor's 500 rose 10 points, or 0.4 percent, to 2,788.
The Nasdaq composite rose 30 points, or 0.4 percent, to 7,677.
The yield on 10-year Treasuries advanced two basis points to 2.97 percent.
Germany’s 10-year yield increased four basis points to 0.49 percent.
Britain’s 10-year yield climbed two basis points to 1.407 percent, the highest in almost three weeks.
Craig Birk, executive vice president of portfolio management at Personal Capital in San Francisco said in a note, “There is a lot going on. One good thing about that is, when there’s just one issue dominating the headlines, people tend to overestimate the impact, and with so much going on all at once it’s natural to think that it would cause more volatility. But it can also help people realize that markets rarely are moved or depend on just one thing and also what matters most is the economy and profits, not politics.”
Further, Stephen Innes of currency trader Oanda said in a report, “The Trump-Kim summit is the massive event that has a far-reaching regional implication. While the markets had low expectations going into G7, assumptions are running high, so if the talks somehow go sideways, there could be a reasonably aggressive regional risk-off move.”