Asian markets rally as Deutsche Bank fears recede

Hong Kong, China | AFP | Monday 10/3/2016 – Asian markets rallied Monday, with financials up on easing fears about the future of German giant Deutsche Bank, after a source said it was nearing a deal to slash a multi-billion-dollar US fine.

Traders fled for cover last week, sending stocks reeling Friday, after US officials slapped the lender with a US$ 14 billion charge over its role in the subprime mortgage crisis.

The gigantic figure fuelled fears the bank could go under and spark another global financial downturn, while Bloomberg News said several hedge funds had withdrawn their investments in the firm – though the company said it was in a “stable financial position.”

However, on Friday, a person familiar with the matter told AFP that the German bank is near an agreement to pay a much more manageable US$ 5.4 billion to resolve the case.

“Investors were nervous about the uncertainty surrounding Deutsche Bank and the potential spillover effect on other European banks, but the mood is to take a wait-and-see approach for now,” Yutaka Miura, senior technical analyst at Mizuho Securities Co. in Tokyo, told Bloomberg News.

In Japan, the Nikkei ended the morning session 1.1 percent higher, with investors brushing off the closely watched Tankan survey showing Japanese business confidence at its lowest in three years.

Hong Kong gained 1.4 percent, Sydney climbed one percent and Singapore put on 0.3 percent. There were also strong gains in Jakarta, Taipei and Manila. The advance tracked a rally on US and European markets.

Among the main winners were banks, with Sydney-listed Commonwealth Bank up 1.6 percent, while HSBC was up a similar amount in Hong Kong. Mitsubishi UFJ Financial Group added more than one percent in Tokyo.

Shanghai, Seoul and Kuala Lumpur were closed for public holidays.

In currency markets, the pound slid against the dollar, after British Prime Minister Theresa May set a timetable to leave the European Union by 2019.

The announcement sets up Britain for years of horse-trading, after June’s shock referendum vote to leave the EU.

Sterling fell to US$ 1.2926 from US$ 1.2974 in New York late Friday, while it also eased to 1.1513 euros from 1.1543 euros.

“We’re back to the Brexit risks,” Vishnu Varathan, a senior economist at Mizuho Bank in Singapore, said.

“Sterling has taken a bit of a knock first. If the concerns become wider concerns about financial market contagion, we will find that the slight softening that we’ve seen in the dollar trend will be shaken off.”