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Stocks shake off G7 row, U.S. Treasury auctions see strong demand

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(Reuters) - U.S. and European stocks edged up on Monday as investors shook off the weekend’s chaotic G7 summit ahead of a week packed with diplomatic events, while a pair of U.S. Treasury Department auctions met with strong demand.

Bullishness on the part of investors that the historic summit scheduled for Tuesday between U.S. President Donald Trump and North Korean leader Kim Jong Un will go well helped the S&P 500 rise, along with gains in utility Sempra Energy.

Trump, in Singapore for the summit, said the meeting could “work out very nicely” as the countries try to narrow differences on how to end a nuclear standoff on the Korean peninsula.

“No one expects anything concrete to come of the meeting ... but if the tone is positive afterwards, it won’t be a headwind for stocks,” said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York.

The Dow Jones Industrial Average .DJI rose 47.52 points, or 0.19 percent, to 25,364.05, the S&P 500 .SPX gained 7.9 points, or 0.28 percent, to 2,786.93 and the Nasdaq Composite .IXIC added 21.14 points, or 0.28 percent, to 7,666.65.

Sempra (SRE.N) proved the biggest driver of the S&P’s rally, surging 15.7 percent to $117.31 as of 3:09 p.m. ET, after two key shareholders recommended six new directors for the company’s board and urged a strategic review of its business.

U.S. Treasury yields climbed as the Treasury Department sold $54 billion in new coupon-bearing supply, and on the expectation that the Federal Reserve will raise interest rates on Wednesday.

Demand for the Treasury Department’s $32 billion sale of three-year notes and $22 billion sale of 10-year notes was strong.

Three-year notes sold at a high yield of 2.664 percent, just below where they traded before the auction. Indirect bidders, which include fund managers, some central banks and other investors, took their largest share of the auction since January.

Benchmark 10-year notes US10YT=RR last fell 7/32 in price to yield 2.9589 percent, up from 2.935 percent to end last week.

The 30-year bond US30YT=RR last fell 10/32 in price to yield 3.0976 percent, up from 3.082 percent on Friday.

INVESTORS AWAIT MEETINGS

Markets seemed willing to abide a rowdy G7 summit over the weekend in anticipation of a slew of diplomatic and policy events this week.

Trump upset the Group of Seven’s efforts to show a united front, choosing to back out of a previous joint communique. The action drew criticism from Germany and France, and Trump called Canadian Prime Minister Justin Trudeau “very dishonest and weak.”

The Canadian dollar fell about 0.4 percent on the news to C$1.2977, while the Mexican peso shed 1.17 percent to 20.531 pesos per U.S. Dollar.

By and large, though, “markets are generally overlooking negative takeaway” from the G7 meeting, said Peter Cecchini, chief market strategist at Cantor Fitzgerald in New York.

Instead, they are looking ahead to a busy week. Tuesday’s North Korea summit will be followed by meetings of the U.S. Federal Reserve, which is expected to raise rates, and the European Central Bank - as well as a Brexit bill vote in the British parliament.

Also helping calm markets were comments from Italy’s new coalition government that it had no intention of leaving the euro zone and planned to cut debt.

The statements pushed Italian stocks .FTMIB up more than 3.4 percent, while the pan-European FTSEurofirst 300 index .FTEU3 rose 0.72 percent.

MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.35 percent.

The prospect of Italy remaining in the euro zone also sent Italian borrowing costs down sharply, as the euro EUR= rallied 0.15 percent to $1.1784, not far off a two-week high of $1.1840.

The dollar index, which measures the greenback against a basket of other currencies, .DXY rose 0.03 percent

In commodities, oil prices fell in early activity, pulled down by rising Russian production, before regaining momentum later.

U.S. crude CLcv1 rose 0.55 percent to settle at $66.10 per barrel, while Brent LCOcv1 settled at $76.46, unchanged

Reporting by Nick Brown; additional reporting by Sruthi Shankar, Karen Brettell and Tom Finn; Editing by Nick Zieminski and Steve Orlofsky

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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