Wall St pulls back from Friday’s rally

The ASX is set for a soft open after US stocks started the quarter in the red, despite upbeat manufacturing data.

US stocks slipped, although traders were encouraged by upbeat manufacturing data. Picture: AP Photo/Richard Drew.

US stocks pulled back after Friday’s rally capped their best quarter of the year.

In Europe, the British pound hit a three-year low against the euro after Prime Minister Theresa May said Brexit talks would start by March. But the weak pound boosted manufacturing data which pushed London stocks higher.

The Australian share market is set to take Wall Street’s lead, with ASX futures down 19 points at 7.19am.

The Dow Jones Industrial Average declined 54 points, or 0.3 per cent, to 18254. The S&P 500 fell 0.3 per cent, and the Nasdaq Composite dropped 0.2 per cent.

Stocks briefly pared losses after a gauge of US manufacturing rebounded in September. The Institute for Supply Management said its manufacturing index increased last month, after a contraction in activity in August.

The results bring hope for manufacturers that have been hurt by weak business spending and sluggish economic growth.

US government bonds fell, with the yield on the 10-year Treasury note rising to 1.624 per cent, according to Tradeweb, compared with 1.605 per cent Friday.

The WSJ Dollar Index, which measures the US currency against 16 others, rose 0.1 per cent.

Stocks that investors consider bond proxies because they tend to pay steady dividends, such as utilities, were among the biggest decliners. The utilities sector of the S&P 500 lost 1.4 per cent after falling 6.7 per cent in the third quarter — its biggest quarterly drop since 2009. Real-estate shares fell 1.8 per cent Monday.

Some traders said volumes were low. “There’s not a whole lot of conviction on either side,” said Sahak Manuelian, managing director of equity trading at Wedbush Securities.

Energy shares fell even as US crude oil hung onto last week’s rally, settling up 1.2 per cent at $US48.81 a barrel Monday. An agreement by the Organization of the Petroleum Exporting Countries to cut oil production sparked a lift in oil prices last week.

Shares in Asia closed higher, while the Stoxx Europe 600 edged up 0.1 per cent. Markets in China and Germany were closed for holidays.

In currencies, the British pound slumped as investors focused on Britain’s plans to leave the European Union. The pound was recently down 0.9 per cent against the US dollar at $US1.2858.

British Prime Minister Theresa May said Sunday that the UK would start disentangling itself from the European Union by the end of March and signalled she would pursue a clean break.

“We’re getting a bit more clarity about the shape Brexit will take,” said Vasileios Gkionakis, head of global currency strategy at UniCredit Research. “A ‘hard Brexit,’ which means more restricted access to the single market, seems to be increasingly the most likely scenario,” he said.

Mr Gkionakis expects this to have a measurable economic impact on the UK and trigger further depreciation for sterling.

London’s export-heavy FTSE 100 index, which tends to benefit from a weaker currency, rose 1.2 per cent, leading gains in European stock markets.

In addition, data showed the UK manufacturing sector continued to expand in September.

Even with German markets closed for a holiday, investors continued to follow headlines around Germany’s largest lender.

The Wall Street Journal had reported in September that the US Justice Department proposed Deutsche Bank pay $US14 billion to reach a settlement related to its dealings in mortgage securities ahead of the financial crisis.

Shares in Deutsche Bank had risen sharply from multiyear lows late Friday after AFP reported that the settlement with the US Justice Department may be closer to $US5.4 billion. The Wall Street Journal reported late Sunday that Deutsche Bank’s talks with the Justice Department were continuing, with no deal yet presented for approval on either side, according to people familiar with the matter.

US-traded shares of the German lender declined 0.8 per cent.

In corporate news, shares of Henderson Group gained 17 per cent in Europe after the London-based investment-management firm announced an all-share merger with Janus Capital Group. Janus rose 12 per cent.

Earlier, shares in Asia mostly advanced, catching up with Friday’s late gains in Europe and on Wall Street. Japan’s Nikkei Stock Average rose 0.9 per cent even after big Japanese manufacturers cut their profit outlook and reported only a modest pick-up in business conditions, while shares in Hong Kong added 1.2 per cent.

Dow Jones