Asian markets higher; pound weakens as Brexit process kicks off

Tomohiro Ohsumi | Bloomberg | Getty Images

Asian markets were higher on Monday as investors mulled the possibility of a settlement between Deutsche Bank and the U.S. Department of Justice.

Meanwhile, the pound slipped after British Prime Minister Theresa May kick-started the Brexit process on Sunday. May said she would introduce a repeal bill to revoke the 1972 European Communities Act in April or May 2017, overturning the law that allowed Britain to enter the European Union.

"This has essentially doused any hope of a second referendum for the U.K. to remain in the EU, and it has put a timeframe of six months for the U.K. government to prepare for negotiations," Alex Wijaya, a senior trader at CMC Markets, said in a Monday note.

The pound weakened against the greenback to trade at $1.2927 at 2:26 pm HK/SIN on Monday, after touching lows of $1.2902, its weakest point since mid-August.

"[Brexit negotiations] are not going to be a smooth process. There is the perception that the Europeans are going to cave in and give Britain a very favorable trade deal...and that is simply false," said Paul Krake, founder of View from the Peak, in a Street Signs interview.

Down Under, the ASX 200 closed up 0.78 percent, or 42.579 points, at 5,478.5, buoyed by its energy subindex, which climbed up 1.33 percent, and its heavily-weighted financials sector, which was up 1.17 percent.

Japan's Nikkei 225 finished up 0.9 percent, or 148.83 points, at 16,598.67 even though the Bank of Japan's closely watched business sentiment survey showed major manufacturers' sentiment remained unchanged from the previous quarter.

In Hong Kong, the Hang Seng index was trading up 0.97 percent. Markets in Malaysia and South Korea are shut on Monday for public holidays, while mainland Chinese markets will be shut for Golden Week.

Indian shares gained despite India's factory activity slowing in September as seen from the Manufacturing Purchasing Managers Index (PMI) falling to 52.1 from August's 52.6. The Nifty 50 index was up 1.03 percent and the Sensex was up 0.95 percent.

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Traders have been watching for a potential settlement between Deutsche Bank and the U.S. Department of Justice. U.S.-listed shares in the German bank surged 14 percent on Friday on news its settlement of a mortgage-backed securities mis-selling case could be reduced from $14 billion to $5.4 billion.

The prospect that Deutsche Bank did not have sufficient liquidity to sustain a $14 billion hit roiled global markets last week.

As of 2:32 pm HK/SIN time, the U.S. dollar index, which tracks the dollar against a basket of major currencies, was trading at 95.531 while the dollar/yen currency pair was trading at 101.31, compared to levels as low as 100.085 yen last week.

The Australian dollar was trading at 0.7652 against the greenback at 2:32 pm HK/SIN time and was mostly rangebound throughout the Asian session.

"Tomorrow we have the first Reserve Bank of Australia interest rate announcement under new Governor Lowe. This promises to be gloriously non-eventful with the street [expecting] 100 percent with no change and a [cut/paste[ of the previous statements wording," Jeffrey Halley, market strategist at OANDA Asia Pacific, said in a Monday note.

The Dow Jones industrial average finished up 0.91 percent at 18,308.15 on Friday, while the S&P 500 climbed 0.8 percent at 2,168.27, and the Nasdaq composite ended up 0.81 percent at 5,312.0.

U.S. crude futures were trading down 0.64 percent at $47.93 per barrel while Brent futures were trading lower by 0.44 percent at $49.97.

Oil prices gained in September, pushed up an announcement late in the month from the Organization of the Petroleum Exporting Countries that it would aim to cut output. Brent crude settled up 4 percent for the month and U.S. West Texas Intermediate (WTI) crude rose 8 percent.

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CORRECTION:, This report has been updated to reflect that South Korea's stock market is closed on Monday.