October 3, 2016 / 8:32 AM / 2 years ago

European shares edge up as fund management stocks advance

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* Henderson/Janus deal lifts shares of fund managers

* German DAX market closed for public holiday

* STOXX 600 still down around 6 pct in 2016

By Sudip Kar-Gupta

LONDON, Oct 3 (Reuters) - European stock markets made minor gains on Monday, as a rise in the shares of fund management companies in the wake of a large merger in the sector propped up markets.

Nevertheless, lingering concerns over Deutsche Bank still weighed on the minds of some investors.

The pan-European STOXX 600 index was up 0.2 percent, although the index remained down by around 6 percent since the start of 2016.

Britain’s FTSE 100 rose 1.2 percent, partly helped by a drop in sterling, as a weaker pound typically benefits the FTSE’s export-driven, internationally focused companies. The currency fell after Prime Minister Theresa May set a March deadline to start the formal departure process for Britain’s exit from the European Union.

Shares in fund management companies rose after Britain’s Henderson Global Investors agreed to an all-share $6 billion merger with Janus Capital.

Henderson shares surged 18 percent, while rivals such as Aberdeen Asset Management, Jupiter and Schroders rose 5 percent, 4 percent and 2 percent respectively.

“Given the increased scale, this deal may kick off a round of merger speculation involving other asset managers such as Jupiter,” said Cantor Fitzgerald analyst Keith Baird.

Although Deutsche Bank’s main German-listed shares were not trading due to a public holiday, the company’s woes remained at the forefront for many investors.

Deutsche Bank is throwing its energies into reaching a settlement before next month’s presidential election with U.S. authorities demanding a fine of up to $14 billion for mis-selling mortgage-backed securities.

City of London Markets Limited trader Markus Huber said some traders were encouraged by signs that Deutsche Bank - whose shares closed up 6.4 percent in Frankfurt on Friday - could agree on a fine far less than $14 billion.

Analysts at JP Morgan and Morgan Stanley have forecast Deutsche Bank could reach a settlement in the $5.4-$6 billion region.

However, other traders said Deutsche Bank’s shares would remain under pressure while there was no deal, with Deutsche Bank still down around 50 percent since the start of 2016 while the STOXX Europe 600 bank index is down 20 percent.

“The European banking system is clearly going through tough times, with high levels of non-performing loans, squeezed margins due to negative interest rates, tougher regulations, weak economic growth and competition with the fintech industry booming,” said FXTM chief market strategist Hussein Sayed. (Editing by Jon Boyle)

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