Investment Research General Market Conditions 07 January 2013 Danske Daily Key news Liquidity requirements in Basel III have been loosened and delayed. The S&P ended Friday s session at a five-year high. Markets Overnight It was announced on Sunday that banks will be given four more years to fully comply with the liquidity coverage ratio (LCR) (until 2019), which is part of the Basel III regulation. The major central bank chiefs agreed over the weekend to delay and loosen the planned bank liquidity rules compared with previous blueprints. The softening of the requirements is a reaction to concerns that too tight regulation and an aggressive timeline could weigh down on lending and jeopardise the economic recovery. The LCR deal also includes that lenders will be allowed to use a broader range of assets including some equities and mortgage debt. The LCR will ensure that banks hold enough easy-to-sell assets to survive a 30-day credit squeeze. Mervyn King, who is chairman of the Group of Governors and Heads of Supervision, said in a statement that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery, see also FT or the BIS statement. US equity markets ended Friday s trade slightly higher supported by decent US data. On the headline Friday s employment report was broadly in line with the consensus estimate but the details were overall solid. Job growth in the private sector maintained the positive momentum and there was an uptick in hourly earnings and the workweek, which all support household income growth, see Flash Comment: US labour market healing continues, 4 January. The ISM service figures surprised to the upside with a jump to 56.1 from 54.7. The S&P ended Friday s trade up by % - the highest level in five years. The S&P rallied 13% in 2012 and is now just 7% from the 2007 peak. Asian stock markets are trading with no clear direction this morning. Nikkei is down 0.3% while Hang Seng is up 0.1%. The S&P future has decreased slightly in Asian trade this morning. Market movers today: Thin calendar today. Market overview Note: * The itraxx Europe Index show the spread development for the most liquid investment grade CDS contracts in the euro credit market. **The itraxx Europe Crossover show the spread development of the most liquid non-investment grade CDS contracts in the euro credit market. Source: Bloomberg 1 day,% S&P (close) 1466.5 0.49 S&P fut (chng from close) 1455.3-0.16 Nikkei 10593.4-0.89 Hang Seng 23290.4-0.17 17:00, bp US 2y gov 6 7 0.4 US 10y gov 1.94 1.88-5.5 itraxx Europe (IG) 104 104 0.4 itraxx Xover (Non IG) 429 430 1.3, % EUR/USD 1.304 1.304-7 USD/JPY 88.140 87.810-0.37 EUR/CHF 1.21 1.21 2 EUR/GBP 0.813 0.813 3 EUR/SEK 8.542 8.538-5 EUR/NOK 7.31 7.32 0.15 USD Oil Brent, USD 11 111.2-6 Gold, USD 1647.7 1661.2 0.82 The sell-off in US Treasuries that was fuelled by last week s hawkish FOMC minutes was halted in Friday s trade. The yield on the 10-year notes has decreased to 1.88% after having tested 1.90% last week. In FX markets EUR/USD quickly shrugged off the hawkish Fed minutes and the cross moved higher on Friday as the US labour market report underlined that an end to the Fed s QE3 programme is not imminent. This morning the cross has edged slightly lower and is trading around 1.305. Senior Analyst Anders Møller Lumholtz +45 45 12 84 98 andjrg@danskebank.dk Important disclosures and certifications are contained from page 4 of this report.
Global Daily Focus today. Today s calendar is thin with the most interesting data release being the Sentix investor confidence, which normally gets little attention from the market. The Sentix index gives a fairly good idea of upcoming movements in German ZEW, which often leads German and euro area PMIs, but beware of false signals. We expect to see investor confidence climbing higher. A handful of Scandinavian tier 2 data are also due for release this morning. Investors are more likely to focus on upcoming events like this week s ECB meeting. The Governing Council is biased towards cutting the refinancing rate but we expect it to keep rates unchanged as leading indicators have begun to improve. Today Mario Draghi is participating at the fifth WELT-Wirtschaftsgipfel Die politische Gestalt des neuen Europas in Berlin (19:30 CET) but we do not expect him to send any signals with regard to Thursday s policy decision. Fixed income markets. US Treasuries rebounded somewhat towards the close last Friday. Ten-year yields closed just below 1.90% after hovering around 1.97% earlier in the session. Even though the labour market report was not too bad, market expectations were probably very high. The rally towards the close points to strong demand around the 1.90%, which marks the peak in yields since May 2012. This level has also held overnight as yields dropped a few bp across the US curve. It is our view that the market will need some more positive news to break out the ranges that have prevailed since last spring. We might get there at some point in 2013 but it is probably too early, with the debt ceiling discussions looming. In Europe, the 2y-5y segment in swap space has also moved significantly higher over the past week and the roll-down is beginning to look very attractive after the wash-out. Today, the Netherlands will print a new 3Y, which is likely to be uneventful. Austria will tap the 10Y and the 49Y - the 10Y pick-up to bunds is off the tights and back to around 40bp, making it look interesting. Denmark will also issue. FX markets. EUR strengthened slightly against USD on Friday and the cross is trading around 1.305 this morning. We believe the risk is still tilted to the upside this week, not least as the ECB meeting later this week should underline that the ECB has no imminent plans to cut rates. In fact, over the past three months there has been a remarkable turnaround in the perception of the euro. In that respect, note that the IMM data that covered the last week of 2012 showed that speculators are now net-long EUR/USD for the first time since August 2011. Scandi Daily Norway. Unemployment figures (LFS) for October will be published today. The Norwegian labour market remained tight even though euro area growth weakened in H2. We expect the unemployment rate to show a minor increase to 3.1 %, which should give no market reactions. Also, look for a continued upward trend in the employment figures. Strong performance in Italy continued in the first week of 2013 550 450 350 250 bps ju l Ita ly s p re a d to G e rm a n y 1 0 y r g o v e rn m e n t b o n d a u g s e p o k t n o v d e c 12 Source: Reuters EcoWin US S&P future 1463 1453 1443 1433 1423 1413 1403 1393 1383 US 10y gov yield 1.94 1.84 1.74 Global FX bps Thu Fri Mon Thu Fri Mon 13 550 450 350 250 1463 1453 1443 1433 1423 1413 1403 1393 1383 1.94 1.84 1.74 1.64 1.64 Thu Fri Mon Wed Fri Mon 1.34 1.33 1.32 1.31 EUR/USD (LHS) USD/JPY (RHS) 88.3 87.4 86.5 1.3 85.6 Thu Fri Mon Wed Fri Mon Key figures and events Monday, January 7, 2013 Period Danske Bank Consensus Previous 9:00 DKK Redundancy notices Persons Dec 2237 9:00 DKK House price index q/q y/y Oct -1.9% -3.6% 9:00 DKK Forced sales (s.a.) Number Dec 455 9:00 DKK Bankruptcies (s.a.) Number Dec 433 9:30 SEK Service production m/m y/y Nov -1.1% -% 10:00 NOK Unemployment (LFS) % Oct 3.1% % 10:30 EUR Sentix Investor Confidence Net bal. Jan -16.8 11:00 EUR PPI m/m y/y Nov 0.1% 2.6% Source: Bloomberg, Danske Bank Markets Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) 8.66 8.62 8.58 8.54 8.50 Thu Fri Tue Thu Fri 7.40 7.36 7.32 7.28 2 07 January 2013
Today s market data: 07 January 2013 0.90 0 0.30 0 DJSTOXX50 2653 % Max 0.9 0 0 Max OM XC20 513 0.9% Min -0.3 Min - OM XS30 1137 % 0.30 0 0.3 0.4 OSE BX 457 0.4% -0.30 15 16 17 18 19 20 21 Grey line indicates closing of Danish markets DOW JONES NASDAQ 1 month 3.4% 1 month 2.7% S&P 1466 Year-to-date 2.8% Year-to-date 2.9% NIKKEI () 10593 % EUR 17:00 USD 130.44 130.35-9 1661.20 111.17 130.8 130.8 JPY 114.97 114.45-2 1 day 5.55-0.14 Max ## GBP 81.32 81.34 2 1 month -42.85 4.15 13 Min ## 13 NOK 731.29 732.39 1.10 Year-t-date -14.15 6 0.3 SEK 854.20 853.81-0.39 13 13 DKK 745.95 745.92-3 CRB C R B, R aw PLN 412.10 412.25 0.15 JPY 88.14 87.81-0.33 1 day -2 1 month 8 GBP 160.40 165-0.15 1 month -7 Year-to-date -8 CHF 92.65 92.73 8 Year-t-date -0.87 * The chart plots - 23:00 Fri and 23:00 Sun to Mon USD-Yields Intraday Spread, P o licy R ate 3M bp 17:00, bp 1.98 0.30 USD2Y USD10Y USD 5 0.31 6 USD 10Y 1.94 1.88-5 Max 0.3 Max 1.95 EUR 0.75 0.19-56 USD 30Y 3.14 7-7 8Min Min 1.9 GBP 0 2 2 JPY 10Y 0.83 0.83 0 0 0 1.92 DKK 0 8 8 6 S&P Intraday, % EUR/USD Intraday 129.9 07 10 13 16 19 22 01 04 4 07 10 13 16 19 22 01 04 0.90 0-0.30 129.9 1.89 1.86 0-0 SEK STOCKS Eurostoxx Intraday, % -0-09 10 11 12 13 14 15 16 17 18 Grey line indicates opening of US markets FX & COMMODITIES YIELDS & INTEREST RATES 0 NOK 0 1.83 33 DEM 10Y 1 4 4 PLN 4.25 3.98-27 DKK 10Y 8 1.61 2, bp SEK 10Y 1.68 1.73 6 USD2Y (lhs) USD10Y (rhs) NOK 10Y 2.21 2.21 0 PLN 10Y 3.92 3.95 3 * The chart plots - 23:00 Fri and 23:00 Sun to Mon * As of closing previous trading day 1.24 24 1 - (-1)* Close Close 13435 3102 Go ld, $ 1M future 294.13 17:00 0.3% % % Oil, B rent, $ Industrials 530.32 1.26 13.82-8 10Y Yield Spread to Germany 2.73 2.41 81 8 0.35 7 0.19 USDJPYGBPFRF ITL DKKSEKNOKPLN - - -0.71 - - 1.8 1.6 1.4 1.2 0.8 0.4 US Yield Curve -0.4-0.9-1.4-1.9-2.4 ## M ax 00 ## M ax ### -2.9 0.8 ## M in -4.430 ## M in ### USD2Y USD5Y USD10Y D-t-D, bp (right axis) (left axis) 1 month ago (left axis) -3.4-3.9-4.4 German Yield Curve 1.8 3.5 1.6 1.4 1.2 0.4 DEM2Y DEM5YR DEM10Y D-t-D, bp (right axis) (left axis) 1 month ago (left axis) C redit spread, it raxx s. 11* 1 day 1 month Non-finan. 92-3 -7 200 180 160 Credit spreads * Ask price ** Ask price Swap Spread, bp** 17:00 USD 17:00 USD 10Y 3 3 0 Europe (IG) 104 1-14 140 JPY 10Y 5 HiVol 158 1-22 120 100 Xover (N-IG) 430 10-51 80 (-1)* 17:00 60 200 EUR 10Y 22 19-3 40 20 100 DKK 10Y 31 27-3 Finan. Sr. 127 2-27 0 0 SEK 10Y 47 48 1 Jan Feb Apr May Jul Aug Oct Nov Jan Finan. Sub. 212 4-52 NOK 10Y 105 105 0 itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) 800 700 600 * As of closing previous trading day 3 07 January 2013
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