Japan’s Shares Track Global Rally as Deutsche Bank Concern Eases

Japanese shares climbed, following global equities higher, as concern over Deutsche Bank AG’s financial troubles receded on speculation the German lender’s settlement with U.S. authorities will be smaller than expected.

The Topix index added 0.6 percent at the close in Tokyo after dropping the most in nearly three weeks on Friday. Bank stocks, which fell the most among the Topix’s 33 industry groups last week, advanced on Monday after Agence France-Presse reported Deutsche Bank was nearing a pact to pay the U.S. Department of Justice $5.4 billion, less than half the amount initially levied on the lender as part of a probe tied to residential mortgage-backed securities.

SecurityPercent ChangePrice
Topix+0.6%1,330.72
Nikkei 225+0.9%16,598.67
Yen-Dollar-0.1%101.45

“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,” said Yutaka Miura, a senior technical analyst at Mizuho Securities Co. in Tokyo. Japanese equity investors will likely focus on U.S. economic data due later this week for directional cues, he said.

In Japan, the Tankan index, a survey of business sentiment among large manufacturers, stood at 6 in September, slightly weaker than economists’ estimates and unchanged from the previous quarter. The yen weakened against the dollar following the data, heading for a fifth day of declines.

More than two stocks rose for each that fell on the Topix. A gauge tracking banks rose 0.3 percent after falling 7.5 percent last week, while a measure of brokerages jumped 1.9 percent. The Bank of Japan confirmed on Friday that it would decrease its purchase target for debt maturing in more than 10 years, a move that would support long-term interest rates.

  • Adastria Co. surged 14 percent after the clothing-store chain operator raised its full-year net income forecast by 20 percent. 
  • Taiyo Holdings Co., an exporter of resist ink for printed circuit boards, jumped 3.8 percent after Mitsubishi UFJ Morgan Stanley Securities Co. rated the company a buy. 
  • Kawasaki Heavy Industries Ltd. slumped 11 percent after the machinery maker posted weaker-than-expected preliminary operating profit for the first half and slashed its full year forecast for the year by 51 percent. The stock was the worst performer on the Nikkei 225.
  • Coca-Cola West Co. advanced 5.8 percent after the company said it agreed to buy Coca-Cola East Japan Co. in a deal valued at 270 billion yen ($2.7 billion), to improve efficiency amid intensifying competition in the country’s soft drinks business.

Futures on the S&P 500 Index were little changed. The underlying measure climbed 0.8 percent on Friday as worries over the health of European banks diminished on the AFP report. Deutsche Bank’s stock and debt have been under pressure after the DOJ earlier this month requested $14 billion to settle an investigation into residential mortgage-backed securities.

The German lender is also poised to eliminate about 1,000 jobs in its home market as part of Chief Executive Officer John Cryan’s cost cuts announced last year, said people with knowledge of the matter. Cryan has been struggling to reassure investors that he’s able to boost profitability as concerns about mounting legal costs prompted some clients to pull funds and investors questioned the lender’s financial health.

“It’s good for stocks when concerns ease, but we don’t have sufficient information to say that a cutback in the settlement fee means all of Deutsche Bank’s finances have been sorted out,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd. “We need something that will clear up the uncertainties as much as possible.”

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