Stocks gain, dollar falls; political worries ease in…

By Caroline Valetkevitch

NEW YORK, June 4 (Reuters) – Stocks on world indexes and Treasury yields climbed on Monday, while the dollar fell to a two-week low as political tensions in Europe eased.

Italy’s anti-establishment parties formed a coalition government on Friday to end three months of political deadlock.

Italian bond yields fell after soaring last week on fears a snap election would be called that might effectively become a referendum on euro membership.

The spread on Spanish bond yields over benchmark German Bunds also narrowed after a new prime minister was sworn in in Madrid, though Socialist Pedro Sanchez’s minority administration faces a tough baptism from a revived independence drive in Catalonia.

U.S. Treasury yields rose as investors pared their safe-haven holdings of lower-risk government debt amid reduced anxiety about the political turmoil in Italy and Spain.

Benchmark 10-year notes last fell 6/32 in price to yield 2.9168 percent, from 2.895 percent late on Friday.

The dollar index fell 0.13 percent, with the euro up 0.21 percent to $1.1685.

“With European political drama retreating from the brink, the peak in the dollar index was likely observed at 95,” said Mazen Issa, senior FX strategist, at TD Securities in New York.

Lingering trade disputes will also contribute to a challenging backdrop for the U.S. dollar in the weeks ahead, he added.

U.S. stocks rose on Monday led by gains in technology shares and helped by Friday’s robust jobs data, which gave investors heightened confidence that the U.S. economy remained strong.

The Dow Jones Industrial Average rose 174.7 points, or 0.71 percent, to 24,809.91, the S&P 500 gained 8.01 points, or 0.29 percent, to 2,742.63 and the Nasdaq Composite

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