By Jon Sindreu 
   -- Dollar ticks up, Treasury yields edge down 
 
   -- Italian government bonds continue to sell off 
 
   -- Oil prices down 

Stock investors recovered some risk appetite Friday after North Korea offered a measured response to the U.S. canceling a landmark summit.

The Stoxx Europe 600 was up 0.5% in early European trade, as futures pointed to 0.1% opening gains for both the S&P 500 and the Dow Jones Industrial Average. In Asia, Chinese and South Korean bourses were down, but only slightly, and Japan's Nikkei Stock Average closed up 0.1%.

Meanwhile, 10-year Italian government-bond yields rose to their highest level since 2014, with the spread versus German debt widening to another one-year high--a reflection of worries about the new Italian antiestablishment government.

Equity markets around the world had closed broadly down Thursday after President Donald Trump called off a much-awaited summit between Washington and Pyongyang citing "open hostility" from North Korea, just as the Commerce Department said the U.S. administration was considering new tariffs on vehicles and auto-parts imports.

But North Korea's response was softer than many analysts were expecting, with officials saying in a statement they remained willing "to sit down face-to-face with the U.S. and resolve issues anytime and in any format."

Money managers have started to pay much closer attention to a raft of geopolitical concerns over the past few weeks--after brushing them off earlier in the year--including tensions between the U.S. and Korea, the potential of a U.S.-China trade war and developments in Italy once again testing the resilience of the eurozone.

"We are avoiding Italian risk because there's a contagion fee there," said Angus Sippe, a fund manager at Schroders.

But many investors remain convinced that these rekindled tensions are driven by a new aggressive negotiating style favored by upstart politicians--including Mr. Trump--but that they are unlikely cause disruption in the longer term.

So far, despite some wobbles, the S&P 500 is up 0.6% on the week and 3% on the month.

"I think you'd be manic if you tried to buy things based on what's tweeted out all time," said Sandy Villere, manager of the Villere Balanced Fund, who believes the true focus remains the stronger dollar and higher Treasury yields.

This is "going to be good for the small-caps rather than the multinationals with a lot of exports," Mr. Villere added.

The WSJ Dollar Index, which measures the U.S. dollar against a basket of currencies, was up 0.2% Friday, while 10-year Treasury yields edged down to 2.978%, from 2.981% Thursday.

In commodities, Brent crude, the global oil benchmark fell 0.5% to $78.42 a barrel.

Write to Jon Sindreu at jon.sindreu@wsj.com

(END) Dow Jones Newswires

May 25, 2018 04:13 ET (08:13 GMT)