(ADVISORY- Follow European and UK stock markets in real time onthe Reuters Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets)
* 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 minorgains on Monday, as a rise in the shares of fund managementcompanies in the wake of a large merger in the sector propped upmarkets.
Nevertheless, lingering concerns over Deutsche Bank still weighed on the minds of some investors.
The pan-European STOXX 600 index was up 0.2percent, although the index remained down by around 6 percentsince the start of 2016.
Britain's FTSE 100 rose 1.2 percent, partly helpedby a drop in sterling, as a weaker pound typically benefits theFTSE's export-driven, internationally focused companies. Thecurrency fell after Prime Minister Theresa May set a Marchdeadline to start the formal departure process for Britain'sexit from the European Union.
Shares in fund management companies rose after Britain'sHenderson Global Investors agreed to an all-share $6billion merger with Janus Capital.
Henderson shares surged 18 percent, while rivals such asAberdeen Asset Management, Jupiter and Schroders rose 5 percent, 4 percent and 2 percent respectively.
"Given the increased scale, this deal may kick off a roundof merger speculation involving other asset managers such asJupiter," said Cantor Fitzgerald analyst Keith Baird.
Although Deutsche Bank's main German-listed shares were nottrading due to a public holiday, the company's woes remained atthe forefront for many investors.
Deutsche Bank is throwing its energies into reaching asettlement before next month's presidential election with U.S.authorities demanding a fine of up to $14 billion formis-selling mortgage-backed securities.
City of London Markets Limited trader Markus Huber said sometraders were encouraged by signs that Deutsche Bank - whoseshares closed up 6.4 percent in Frankfurt on Friday - couldagree on a fine far less than $14 billion.
Analysts at JP Morgan and Morgan Stanley have forecastDeutsche Bank could reach a settlement in the $5.4-$6 billionregion.
However, other traders said Deutsche Bank's shares wouldremain under pressure while there was no deal, with DeutscheBank still down around 50 percent since the start of 2016 whilethe STOXX Europe 600 bank index is down 20 percent.
"The European banking system is clearly going through toughtimes, with high levels of non-performing loans, squeezedmargins due to negative interest rates, tougher regulations,weak economic growth and competition with the fintech industrybooming," said FXTM chief market strategist Hussein Sayed. (Editing by Jon Boyle)
