Stocks around the world rose along with U.S. Treasury bond yields and the U.S. dollar on Monday as investors regained some appetite for riskier assets as the United States and North Korea appeared to take a break from their war of words.
After a week of market jitters from increasingly aggressive exchanges between the nuclear-armed nations, investors were emboldened after South Korea's president said resolving North Korea's nuclear ambitions must be done peacefully and U.S. officials played down the risk of an imminent war.
Oil investors, however, had little to celebrate with daily declines of more than 2 per cent.
MSCI's world equity index gained 0.75 per cent and the U.S. benchmark S&P 500 rebounded to close up 1 per cent after its biggest weekly loss in almost five months, marking just the third time the U.S. benchmark has boasted a 1-per cent daily gain in 2017.
"There's still cash on the sidelines looking for an opportunity to buy the dip. And they're in there with both hands today," Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
The Dow Jones Industrial Average rose 135.39 points, or 0.62 per cent, to 21,993.71, the S&P 500 gained 24.52 points, or 1.00 per cent, to 2,465.84 and the Nasdaq Composite added 83.68 points, or 1.34 per cent, to 6,340.23.
Last week's fear was prompted by U.S. President Donald Trump's warning North Korea would face "fire and fury" if it threatened the United States and North Korea's announcement it was considering plans to fire missiles at the U.S. island territory of Guam..
While investors were relieved the weekend passed without further escalation, some were mindful, ahead of North Korea's Liberation Day celebration marking the end of Japanese rule, that tensions could resurface.
"Tensions might flare up again. This is not the last we are going to hear of this situation," said Justin Hoogendoorn, head of fixed income strategy and analytics at Piper Jaffray in Chicago.
In currencies, the U.S. dollar rose 1 per cent against the Swiss franc, erasing much of the greenback's losses last week against the safe-haven currency, which was set for its biggest one-day drop against the dollar since July.
The dollar was up 0.45 per cent against the Japanese yen, reversing some of its 1.37 per cent loss last week against the safe-haven currency. Against a basket of major currencies, the U.S. dollar <.DXY> rose 0.36 per cent on the day but has fallen 8.6 per cent so far this year.
U.S. Treasury benchmark yields rebounded from six-week lows as investors pared back holdings of low-risk government debt.
The yield rise was also underpinned by an Associated Press report that New York Federal Reserve President William Dudley would support another interest rate hike if economic data meets his expectations.
Benchmark 10-year notes last fell 10/32 in price to yield 2.2202 per cent, from 2.187 per cent late on Friday. Oil prices tumbled in a volatile session, hurt by the rising dollar and weak domestic demand data from China. Earlier in the session oil prices saw a short-lived boost on potential reductions in crude supply from Libya.
U.S. crude settled down 2.5 per cent while Brent ended the session 2.63 per cent lower and slipped further after settlement.
U.S. crude was last down 2.7 per cent at US$47.50 per barrel and Brent was last at US$50.65, down 2.78 per cent.
Gold was out of favor on Monday after clocking a 2.46 per cent jump and hitting two-month highs last week. Spot gold dropped 0.5 per cent to US$1,282.13 an ounce.
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