1. Asia stocks start firm, sterling stumbles

Asia stocks start firm, sterling stumbles

Asian shares began the new quarter cautiously firmer on Monday, while sterling took a spill as Britain set a March deadline to start divorce proceedings from the European Union.

By: | Sydney | Published: October 3, 2016 5:59 AM
Risk sentiment had benefited on Friday from reports Deutsche Bank was negotiating a much smaller fine with the US Department of Justice, though the Wall Street Journal reported on Sunday that the talks were in flux. (Reuters) Risk sentiment had benefited on Friday from reports Deutsche Bank was negotiating a much smaller fine with the US Department of Justice, though the Wall Street Journal reported on Sunday that the talks were in flux. (Reuters)

Asian shares began the new quarter cautiously firmer on Monday, while sterling took a spill as Britain set a March deadline to start divorce proceedings from the European Union.

Risk sentiment had benefited on Friday from reports Deutsche Bank was negotiating a much smaller fine with the US Department of Justice, though the Wall Street Journal reported on Sunday that the talks were in flux.

Just a hint of a deal was enough to nudge MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.2 percent. The index climbed 8.8 percent in the third quarter, its best performance since early 2012.

The Australian market added 0.6 percent, while futures pointed to a modest opening gain for Japan’s Nikkei.

The mood was supported by a survey showing activity in China’s manufacturing sector expanded again in September, which may indicate that recent positive momentum can be sustained.

The official Purchasing Managers’ Index (PMI) stood at 50.4 in September, identical with the previous month’s level. A reading above 50.0 shows growth on a monthly basis.

Chinese markets are on holiday for the entire week.

Sterling shed half a US cent after British Prime Minister Theresa May said she would trigger the process for the UK to leave the European Union by the end of March.

The pound was last quoted at $1.2929 having been down as far as $1.2902 at one point, its lowest since mid-August.

May on Sunday told the ruling Conservative party’s annual conference that she was determined to move on with the process and win the “right deal”.

Using Article 50 of the EU’s Lisbon Treaty will give Britain a two-year period to clinch one of the most complex deals in Europe since World War Two.

Things were quieter elsewhere in the currency market, with the dollar steady at 101.40 yen having wandered between 101.02 and 101.75 on Friday.

The euro was flat at $1.1236, after rebounding from a nine-day low of $1.1153 on Friday, while the dollar index was up 0.07 percent at 95.529.

A rally in financial stocks led Wall Street to a firmer close on Friday. The Dow rose 0.91 percent, while the S&P 500 added 0.8 percent and the Nasdaq 0.81 percent.

A media report late on Friday claimed Deutsche and the US Department of Justice (DOJ) were close to agreeing a settlement of $5.4 billion, rather than the initially touted $14 billion. That report has still not been confirmed.

Deutsche Bank AG’s U.S.-listed shares jumped 14 percent in reaction, but were still down 11.3 percent for the month. Its Frankfurt-listed shares rose 6 percent.

Deutsche has significant trading relationships with all of the world’s largest finance houses and the International Monetary Fund (IMF) has identified it as a bigger potential risk to the wider financial system than any other global bank.

Oil ran into profit-taking on Monday after enjoying its second straight monthly gain in September aided by OPEC’s planned output cuts. Brent crude settled up 4 percent for September and US West Texas Intermediate rose 8 percent.

Early Monday, the December Brent contract was off 29 cents at $49.90 a barrel, while US crude lost 36 cents to $48.88. 

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