By Saikat Chatterjee
LONDON (Reuters) - European stocks climbed on Monday, shrugging off the weekend's fractious G7 summit as investors looked forward to a week packed with diplomatic, policy and political events while reassuring comments from Italy pushed the euro up.
A summit between U.S. President Donald Trump and North Korean leader Kim Jong Un on Tuesday will be followed by meetings of the U.S. Federal Reserve and the European Central Bank plus a Brexit bill vote in the British parliament.
But risky assets were well supported on Monday as comments from Italy's new coalition government saying it had no intention of leaving the euro zone and planned to cut debt levels pushed Italian stocks (FTMIB) up more than 2 percent and a wider gauge of European stocks <.MSER> up 0.6 percent.
"Markets are focused on the headlines from Italy and that has calmed investors as they believe the threat of confrontation with the EU has dropped significantly," said Mike Bell, a global market strategist at JP Morgan Asset Management in London.
U.S. stock index futures (ESc1) were flat after dropping as much as 0.3 percent in early trading, indicating a cautious start for Wall Street. The MSCI world equity index (MIWD00000PUS), which tracks shares in 47 countries, was up 0.1 percent.
With no top level U.S. economic data due for release on Monday, all eyes are on the summit in Singapore and the Fed, which is almost certain to raise interest rates on Wednesday.
Italian Economy Minister Giovanni Tria soothed investors' nerves on Sunday. In his first interview since taking office a week ago, Tria told the Corriere della Sera newspaper that the new coalition was committed to remaining within the single currency and wanted to boost growth through investment and structural reforms.
Bond yields tumbled by 25-50 basis points across the board in Italy while the euro firmed, nearing a recent three-week high.
The single currency (EUR=EBS) rose nearly half a percent to $1.1821 in early trading before trimming some gains to stand 0.2 percent up on the day.
Trump's rejection of a previously signed G7 communique separates the United States from its traditional global economic allies and underlines trade tensions.
However, it had little impact on global markets with investors taking the news in their stride in a week when the world's top central banks - the Fed and the ECB - are set to tighten policy.
"Though the latest headlines are definitely not positive for global trade, risk appetite is broadly firm across the board as investors are of the view it might force the ECB and the Fed to take a cautious approach," said Neil Mellor, a senior currency strategist at BNY Mellon in London.
G7 "MESS"
Stocks wobbled and the dollar edged higher in initial reaction to the G7, which Societe Generale (PA:SOGN) termed as a "mess". However, markets quickly recouped losses, with stocks firmer across the board on expectations that any withdrawal in policy stimulus would be very gradual against the backdrop of the rising trade tensions.
MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) slipped early but was last up 0.2 percent. Hong Kong's Hang Seng (HSI) also gained 0.3 percent while the Shanghai Composite Index (SSEC) fell 0.5 percent.
The Fed is inching closer to a neutral policy stance, while the ECB is likely to signal on Thursday that its 2.55 trillion euro bond purchase scheme will end this year, a major move in dismantling crisis-era stimulus.
The dollar index against a basket of six major currencies was 0.1 percent up at 93.67 (DXY).
Oil prices slipped on rising Russian production and increasing U.S. drilling activity.
Brent crude futures (LCOc1) fell 1.1 percent to $75.66 a barrel and U.S. crude futures (CLc1) slipped more than 1 percent to $64.93 a barrel.