Article / 03 October 2016 at 7:00 GMT

Morning Markets: Deutsche deal prospect sparks rally

Former managing editor, / Saxo Bank



  • Spain: Manufacturing PMI (0715 GMT)
  • US: ISM Manufacturing Index (1400 GMT)
  • US: Motor Vehicle Sales (TBD)

Asian stocks rose sharply Monday morning on the back of an equities rebound at the tailend of the US session sparked by easing fears over the fortunes of Deutsche Bank.

Markets had taken fright when the American Department of Justice had slapped a $14 billion fine  on the German giant but the relief rally took hold and then gained momentum when it emerged the bank was likely to face a far less substantial penalty at around the $5.4bn level. Deutsche shares sparked in the aftermath from an all-time low of below €10 to spike towards €12 for a 6.4% rise and can expect a further boost Monday morning as the financial segment in Asia performed strongly through the session.

As far as the major indices were concerned, the Nikkei was closing in on a 1% on-day rise and the Hang Seng continued its remarkable third-quarter run into Q4 with a 1.16% spike helping to establish a platform for European indices to spike on the open.

Brent crude was holding steady above $50/barrel at a $2/b plus premium to US benchmark WTI as the post-Algiers deal excitement starts to fade, but safe havens gold and bonds were both on the retreat on the back of the relief rally.

UK prime minister Theresa May helped clear some of the mystery surrounding Brexit over the weekend by setting March 31, 2017 as a deadline for initiating the Brexit process but her push for a 'hard' Brexit earned a sharp rebuke from European leaders as France and Germany face key elections in the autumn of 2017 and can expect resources for a diplomatic untangling to be spread rather thin.

Sterling took subsequent fright and GBPUSD was homing in on the 129.0 handle ahead of the European open, some way south of the 1.30 mark that has effectively become the new normal for a currency that had tipped the scales at 1.50 on the night of the referendum on June 23.

With some important data out of the US this week culminating in the September nonfarm payrolls print Friday, this could be a week that sees a return to fundamentals for the direction of the dollar. There is of course every chance that the US presidential campaign could throw a spanner in the works with republican nominee Donald Trump once again under the microscope for his bizarre attacks on a former beauty queen and publication of his tax returns. Plus ca change!

Market signals

Asian session

  • British PM Theresa May will trigger the formal Brexit process by March 31, 2017
  • US nonfarm payrolls due out on Friday will be a key data release this week
  • The rally on Wall St as banking fears retreated lifted sentiment on Asian markets
  • Japan's Nikkei 225 headed into positive territory
  • A mining crackdown in the Philippines could drive up nickel prices
  • The move could affect 10% of the world's nickel supply
  • An oversupply of pigs is driving down pork prices: Bloomberg
  • Australian annual house prices ticked up 7.1% in September, from 7% in August
  • The ASX was open for trading, despite the Labour Day public holiday in some states
  • A relief rally for the big four banks gave the S&P/ASX200 a boost
  • ASX200 closed 0.7% up at 5478.5

Forex ahead

  • USD firmed as Deutsche Bank fears receded and investors looked ahead to jobs data
  • USD was last down slightly at 101.38 yen, but held above last week's low of 100.085
  • Australian dollar edged down 0.2% to 0.7647, ahead of monthly RBA policy decision
  • USDJPY shifting into tight range in run up to US election

From the Floor

May's pledge. "This is seen by the market as a 'hard' Brexit and that's why we are seeing sterling weaken — sterling can remain vulnerable on this issue," says Hardy

Centre stage. "The [Deutsche Bank] CEO John Cryan is flying to the US this week to hopefully finalise a deal," says Garnry.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Political uncertainty is Spain could hurt the economy, including the manufacturing sector, but the Spanish services sector is a bright spot, says James Picerno

Asian relief
The banking sector in Asia led early gains for obvious reasons this morning, proving that Deutsche Bank's woes were all pervasive, says Saxo's Singapore team

Politics and banks in spotlight
For the next few weeks the two central themes will be the US presidential election and concerns over the European banking sector, writes Kay Van-Petersen


Attention is beginning to turn to Friday's nonfarm payrolls as the
American economy looks to keep the wheels turning. Photo: iStock

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