Investment Research General Market Conditions 19 February 213 Danske Daily Key news JPY strengthens as finance minister rules out foreign bond buying. European periphery spreads wider on nervousness ahead of Italian election. We expect the German ZEW and the US NAHB index to surprise on the upside today. Market movers today: German ZEW US NAHB index Swedish CPI and unemployment Markets Overnight The minutes from the January Bank of Japan (BoJ) meeting, at which the central bank raised the inflation target to 2%, showed two dissented on the decision. Sato and Kikuchi both saw the 2% target as too far from what is possible to achieve without risking the central bank s credibility. Prime Minister Abe has stated that Bank of Japan not reaching the target would be a condition for changing the Bank of Japan's law. However, the Japanese finance minister stated overnight that buying foreign bonds will not be part of BoJ s policy. Focus will remain on Japan, as Abe is likely to announce the nominees to for the role of governor of the BoJ next week as he returns from his visit to the US. US markets were closed yesterday but the S&P future is slightly up this morning. Asian equity markets are mixed. A stronger JPY is weighing on the Nikkei and Chinese stocks are lower again today after the week long Lunar New Year holiday. However, most other Asian indices have traded higher overnight. In European bond markets periphery spreads moved wider again on Monday continuing the weakness from Friday. Nervousness is centred around Italy as it heads for the general election this weekend. The outcome is far from certain and it will determine whether the reform process that was speeded up under Mario Monti s technocrat government can continue or whether it will lose substantial momentum. In FX markets JPY has strengthened as the Japanese finance minister rejected the idea of the BoJ buying up foreign bonds as part of its monetary policy. Australia s dollar strengthened after the central bank said that low interest rates are starting to spur economic growth as the outlook for China and the global economy improves. EUR/USD has been broadly stable overnight and so have the Scandi currencies. 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&P5 (close) 1519.8 -.1 S&P5 fut (chng from close) 1518.1 7 Nikkei 11368.3 -.35 Hang Seng 23338. -.19 17:, bp US 2y gov.27 27.4 US 1y gov 1 #### itraxx Europe (IG) 113 113.4 itraxx Xover (Non IG) 44 441 1.1, % EUR/USD 1.335 1.335 1 USD/JPY 93.96 93.63 -.35 EUR/CHF 1.23 1.23 3 EUR/GBP.863.863 3 EUR/SEK 8.472 8.476 4 EUR/NOK 7.42 7.41-8 USD Oil Brent, USD 117.8 117.4 -.37 Gold, USD 167.8 1613.7.36 Senior Analyst Signe Roed-Frederiksen +45 45128229 sroe@danskebank.dk Important disclosures and certifications are contained from page 4 of this report.
Global Daily Focus today. We expect the German ZEW index to increase from 3 to 39., which is above consensus expectations. If we are right, this would support market risk sentiment and likely lift expectations for the IFO and flash PMI released later this week. In the US the NAHB is the first release in a round of housing market data this week. We expect the index to rise one notch indicating an ongoing improvement in activity in the housing market. Otherwise, markets are likely to look ahead for more important releases later this week such as the FOMC minutes tomorrow, the flash PMIs for the euro area and the US and the German IFO index. US NAHB index to confirm housing market recovery 8 In d e x 7 6 5 4 3 2 1 N A H B h o u s in g m a r k e t in d e x 85 9 95 5 1 In d e x 8 7 6 5 4 3 2 1 Fixed income markets. Draghi s speech yesterday was very balanced and had limited impact on the markets. There are no big market movers scheduled for today and rate markets are expected to have another relatively quiet session before more important events later this week. Focus remains on the weekend s Italian elections. Yesterday the southern European bond markets were moderately under pressure and the appetite for the higher yielding bonds is likely to remain subdued during this week ahead of the elections. Safe-haven demand is likely to have a positive rub-off effect on Bunds, where daily price momentum is also beginning to turn bullish again. In the fixed income market, the Danish debt office will tap into DGB % Nov-16 and DGB % Nov-23. FX markets. The yen is slightly stronger on uncertainty about whether purchases of foreign assets still exists as an option in Japan's monetary policy. We still look for a weaker yen, although the bigger move is likely behind us. Scandi Daily In Sweden January CPI (and underlying inflation CPIF) together with unemployment data for January are released today. Please observe that since the latest unemployment data were released last month Statistics Sweden has made a benchmark revision of data, which in principle means that the level of unemployment has been lifted by.3 percentage points. We will probably see a further increase in unemployment during the beginning of this year, reflecting a large number of layoff announcements late last year. The average CPI-forecast among Swedish banks is -.8% m/m (Danske Bank -.9%). In fact, all Swedish forecasters expect a clearly lower inflation outcome compared with the Riksbank (RB forecast: -.4% m/m). In Norway consumer confidence for Q1 will be published today. This is rarely a market mover but it is worth noting how confidence improved steadily last year, while growth in private consumption slowed. This goes to show that the slowdown in private consumption that dragged down GDP growth towards the end of the year seems to have been largely voluntary. Real disposable income growth of 4% in 212, low unemployment and rising house prices can explain the optimism in the household sector. The moderate growth in spending seems to be due partly to retail leakage and partly to higher savings. Source: Reuters EcoWin US S&P5 future 1514 1514 154 154 Fri Mon Wed Thu Fri Tue US 1y gov yield 8 8 1.98 1.98 1.88 1.88 Fri Mon Tue Thu Fri Tue Global FX EUR/USD (LHS) USD/JPY (RHS) 1.361 94.3 1.351 93.6 1.341 92.9 1.331 92.2 Fri Mon Wed Thu Sun Tue Key figures and events Tuesday, February 19, 213 Period Danske Bank Consensus Previous 9: ESP Spain's Rajoy speaks in parliament on the Spanish economy 9:3 SEK CPI m/m y/y Jan -.9% %.3% -.1% 9:3 SEK Underlying inflation CPIF m/m y/y Jan -.9%.6%.3% % 9:3 SEK Unemployment, s.a. % Jan 8.3% 8.% 9:3 SEK Unemployment n.s.a. % Jan 8.7% 7.6% 11: DEM ZEW economic sentiment Index Feb 39. 35. 3 11: DEM ZEW current situation Index Feb 9. 7.8 7.1 11:15 EUR ECB announces allotment in 7-day (MRO) 16: USD NAHB Housing Market Index Index Feb 49 48 47 2:15 EUR ECB's Asmussen speaks in Bratislava Source: Bloomberg, Danske Bank Markets Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) 8.6 8.54 8.48 8.42 Fri Mon Wed Thu Mon 7.43 7.4 7.37 7.34 2 19 February 213
Today s market data: 19 February 213.2 -.2.2 DJSTOXX5 2618 -.2% Max.3 Max.3 OM XC2 529 -.6% Min -.4 Min -.9 OM XS3 1186.2% -.3 -.3.2.3 OSE BX 471 -.1% -.4 15 16 17 18 19 2 21 Grey line indicates closing of Danish markets DOW JONES NASDAQ 1 month 2.3% 1 month -.6% S&P5 152 Year-to-date 6.6% Year-to-date 1.6% NIKKEI () 11368 -.2% EUR 17: USD 133.51 133.53 2 133.7 133.7 JPY 125.45 125.2 -.43 1 day 3.6-2 Max ## GBP 86.26 86.29 2 1 month -7.65 5.47 133.5 Min ## 133.5 NOK 744 741.48 -.56 Year-t-date -61.7 6.25.2 SEK 847.24 847.57.33 133.3 133.3 DKK 745.94 745.89-5 CRB C R B, R aw PLN 418.82 418.75-7 JPY 93.96 93.63 -.33 1 day -1.22 1 month.4 GBP 154.77 154.76-1 1 month -2.75 Year-to-date 1.6 CHF 92.31 92.32 1 Year-t-date 3.44 USD-Yields Intraday Spread,.29 P o licy R ate 3M bp 17:, bp 3 USD2Y USD1Y USD.25.29 4 USD 1Y 1 21.28Max.3 Max 2 EUR.75.22-53 USD 3Y 3.18 318 Min.3 Min GBP.5.51 1 JPY 1Y.75.74-1.27 1 DKK.3.33 3.26 S&P5 Intraday, %.25 7 1 13 16 19 22 1 4 USD2Y (lhs) EUR/USD Intraday 133.1 7 1 13 16 19 22 1 4 USD1Y (rhs) -.2 -.4 133.1 1.99.3 -.6 SEK Eurostoxx Intraday, % -.9 -.9 9 1 11 12 13 14 15 16 17 18 Grey line indicates opening of US markets FX & COMMODITIES YIELDS & INTEREST RATES 1.19 19.3 -.6 (-1)* Close Close 13982, bp NOK 1.89 39 DEM 1Y 1.64 1.63-1 PLN 3.75 3.69-6 DKK 1Y 1.79 1.78-1 3192 Go ld, $ 1613.65 1M future 298.45 17: SEK 1Y 2 4 2 NOK 1Y 7 7.1% -.2% -.1% Oil, B rent, $ 117.36 Industrials 544.37 PLN 1Y 4.6 4.1-4 * As of closing previous trading day 1.8 12.17 13.97 1Y Yield Spread to Germany 3. 2.78 2.39.94.57.64.38.5.16.41 USDJPYGBPFRF ITL DKKSEKNOKPLN -.5 - -.89-3..5 -.5 - - 3..5 US Yield Curve 2 15 1 ## M ax 24 ## M ax ### ## M in.8 ## M in ### 5 USD2Y USD5Y USD1Y D-t-D, bp (right axis) (left axis) 1 month ago (left axis) 1.8 1.6 1.4 1.2.6.4.2 German Yield Curve DEM2Y DEM5YR DEM1Y D-t-D, bp (right axis) (left axis) 1 month ago (left axis) -.1 -.2 -.3 -.4 -.5 -.6 -.7 -.8 -.9 - C redit spread, it raxx s. 11* 1 day 1 month Non-finan. 41-52 2 18 16 Credit spreads USD 1Y * Ask price ** Ask price Swap Spread, bp** Europe (IG) 113 11 14 JPY 1Y 6 HiVol 174 13 12 5 1 4 Xover (N-IG) 441 1 24 8 (-1)* 17: 3 6 2 EUR 1Y 25 25 4 2 1 DKK 1Y 28 28 Finan. Sr. 145 2 12 SEK 1Y 43 41-2 Feb Apr May Jul Aug Oct Nov Jan Feb Finan. Sub. 247 26 NOK 1Y 86 86 itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) 8 7 6 17: * As of closing previous trading day 7 USD 17: 3 19 February 213
Disclosure This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ( Danske Bank ). Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Services Authority (UK). Details on the extent of the regulation by the Financial Services Authority are available from Danske Bank upon request. The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts rules of ethics and the recommendations of the Danish Securities Dealers Association. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of highquality research based on research objectivity and independence. These procedures are documented in Danske Bank s research policies. Employees within Danske Bank s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Financial models and/or methodology used in this research report Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be obtained from the authors upon request. Risk warning Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis of relevant assumptions, are stated throughout the text. Expected updates Danske Daily is updated on a daily basis. First date of publication Please see the front page of this research report for the first date of publication. Price-related data is calculated using the closing price from the day before publication. 4 19 February 213
General disclaimer This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such financial instruments) ( Relevant Financial Instruments ). The research report has been prepared independently and solely on the basis of publicly available information that Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report. The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These opinions are subject to change, and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in this research report. This research report is not intended for retail customers in the United Kingdom or the United States. This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank s prior written consent. Disclaimer related to distribution in the United States This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S. Securities and Exchange Commission. The research report is intended for distribution in the United States solely to "U.S. institutional investors" as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this research report in connection with distribution in the United States solely to U.S. institutional investors. Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are not registered or qualified as research analysts with the NYSE or FINRA, but satisfy the applicable requirements of a non-u.s. jurisdiction. Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in non- U.S. financial instruments may entail certain risks. Financial instruments of non-u.s. issuers may not be registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange Commission. 5 19 February 213