Investment Research General Market Conditions 12 August 2013 Danske Daily Market movers today Today we have a very thin calendar with Spanish house transactions being the most interesting release. The index is at a very low level reflecting that the Spanish housing market continues to look fragile. During the week euro area GDP figures will reveal whether the euro area has ended its recession. We consider the end of the recession to be on a knife-edge but we have revised our euro area growth forecast for Q2 up from -% q/q to +0.1% q/q. In the US the most important release during the week is advanced retail sales. We expect to see an increase in the core measure of retail sales, which will imply a regain of some lost ground. Selected market news Japanese GDP numbers released overnight were in general weaker than expected, as annualised GDP rose 2.6% s.a. q/q compared to an expected 3.6% gain and a revised 3.9% annual growth rate in Q1. Especially, business investments disappointed by falling 0.1% q/q, whereas consumer spending rose a healthy 0.8% q/q. Hence, it seems that consumers continue to believe in Abenomics, whereas the business sector seems less convinced. Today s numbers will be watched closely in respect of the ongoing debate whether the Japanese economy is strong enough to bear a planned increase of 3 percentage points in the sales tax by April next year. Prime Minster Abe has to decide over the coming months whether to proceed with the plans. USD/JPY dipped below 0.96 initially on the news but has now recovered slightly, trading at 0.9650, reflecting that Nikkei has recovered after a negative opening. The negative opening for Nikkei came after the somewhat sour US sentiment on Friday. The US equity market once again took its lead from policy makers. The fear of Fed tapering at the September meeting dented sentiment and the major indices all ended the day lower. US equities experienced the first weekly loss in six weeks. During last week Regional Fed presidents Evans, Pinalto and Fischer all said that the Fed may be closer to tapering as the labour market improves. We stick to our view that tapering will start in September. It might weigh on risk assets but, on the other hand, it reflects that the US economy and especially the labour market are doing quite well. Market overview Note: * The itraxx Europe Index shows 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. ***The Markit CDX North America Investment Grade Index shows the spread development for the most liquid investment grade CDS contracts in the US credit market. Source: Bloomberg Selected readings from Danske Bank Weekly Focus 07:30 1 day +/-,% S&P500 (close) 1691.4-0.36 S&P500 fut (chng from close) 1684.9-8 Nikkei 13492.4-0.90 Hang Seng 22170.7 1.67 17:00 07:30 +/-, bp US 2y gov 0.31 0.31 US 10y gov 2.60 8-1.8 itraxx Europe (IG) 96 96 0.3 itraxx Xover (Non IG) 401 402 1.1 +/-, % EUR/USD 1.335 1.333-0.21 USD/JPY 96.320 96.480 0.17 EUR/CHF 1.23 1.23 7 EUR/GBP 0.861 0.860-5 EUR/SEK 8.673 8.671-3 EUR/NOK 7.81 7.82 0.21 USD Oil Brent, USD 107.3 108.1 0.68 Gold, USD 1311.6 1329.4 1.36 One of the major issues over the summer has been the fear of a more severe slump in the Chinese economy. However, better-than-expected Chinese numbers out Thursday and Friday last week have convinced investors in the Chinese equity market this fear might be overdone. This morning the Shanghai composite index gained further and reached the highest level in almost two months. Especially, real estate developers performed well. Chief Analyst Arne Lohmann Rasmussen +45 45 12 85 32 arr@danskebank.dk Important disclosures and certifications are contained from page 4 of this report.
Scandi markets today No news out of Scandinavia today. US S&P500 future Fixed Income markets Not much has been going on in the USD or EUR fixed income markets last week. None of the limited data we received has been able to challenge the market pricing. Not even the few Fed speeches highlighting the elevated possibility of a start to the QE tapering process at the next meeting in September have had a meaningful impact. Indeed, this suggests that the market is probably already positioned for this scenario. Unless the outlook for central bank policy rates changes measurably, long bond yields are probably relatively fairly priced in terms of the QE risk premium. This week could prove a little more exciting as more important hard data from July and forward-looking data from August begin to trickle in from the US. In terms of bond issuance it will be a quiet week with only Germany coming to the market Wednesday. FX markets It looks like a rather quiet day in the global FX market with no major key events to follow. In respect of the USD all eyes are still on whether tapering starts in September (as we believe) or later. We stick to our long-held view that USD will appreciate as a consequence. According to the latest IMM/CFTC data the market is still very speculative long USD against GBP and JPY. However, the speculative positions have once again turned around in EUR/USD and investors are now betting on a stronger EUR. 1701 1701 1691 1691 1681 1681 Thu Fri Tue Wed Thu Mon US 10y gov yield 2.72 2.72 2 2 Thu Fri Tue Wed Thu Mon Global FX On Friday we saw a strong move lower in EUR/NOK after Norwegian core inflation jumped. However, given that the number basically rules out a rate cut in Norway this year - which takes away the most important risk factor in being long NOK - we argue that further downside for EUR/NOK is in store over the coming weeks. We might see a bit of extra focus on the Swiss franc today. Over the weekend Vice president Danthine from the Swiss Central Bank, SNB, said that the day the SNB decides to raise rates, there can no longer be a restricting minimum exchange rate. Even though Danthine is simply stating the obvious, it might spark some CHF buying today. He also said that it is still too early to say if the counter-cyclical capital buffers introduced for banks could prevent the property market from overheating. Scandi FX EUR/SEK (LHS) 8.81 EUR/NOK (RHS) 7.95 Finally, the FX market will be eagerly awaiting the UK labour market numbers and MPC minutes on Wednesday. Minutes will show if Mark Carney has the full backing of the MPC for the new forward guidance regime in the UK. If the market gets the feeling that other members strongly oppose the new way of conducting monetary policy we could see further support to GBP this week. We believe risk is tilted in that direction. 8.77 8.73 8.69 8.65 Thu Fri Tue Wed Thu 7.91 7.87 7.83 7.79 Key figures and events Monday, August 12, 2013 Period Danske Bank Consensus Previous 1:50 JPY GDP, preliminary q/q ann. 2nd quarter 0.9% 3.6% % 4.1% 1:50 JPY GDP deflator, preliminary y/y 2nd quarter -0.7% -1.1% 1:50 JPY Domestic CGPI m/m y/y Jul 0.2% 1.9% 0.1% 1.2% 6:30 JPY Industrial production, final m/m y/y Jun -3.3% -4.8% 9:00 ESP House transactions y/y Jun -3.7% 9:00 DKK CPI m/m y/y Jul -0.3% 0.6% -0.1% 0.9% 9:15 CHF Retail sales (real) y/y Jun 1.9% Source: Bloomberg, Danske Bank Markets 2 12 August 2013
Today s market data: 12 August 2013 0.40 0.10-0.20-0 DJSTOXX50 Max 0.4 Max 1.3 OM XC20 560 Min -0.8 Min -0.6 OM XS30 1254-0.20 0.40 0.4 0.3 OSE BX 501-0.80 15 16 17 18 19 20 21 Grey line indicates closing of Danish markets 134.0 S&P500 Intraday, % DOW JONES NASDAQ 1 month 0.7% 1 month 1.7% S&P500 1691 2736 0.6% Year-to-date 18.6% Year-to-date 6.2% NIKKEI (07:30) 13492 0.6% EUR/USD Intraday EUR 17:00 07:30 +/- USD 133.53 133.25-0.28 JPY 128.61 128.56-5 1 day 14.99 133.7 Max ## 133.7 GBP 86.06 86.02-4 1 month 43.70 Min ## NOK 780.74 782.40 1.66 Year-t-date -345.95 133.4 0.3 133.4 SEK 867.28 867.06-0.22 133.1 07 10 13 16 19 22 01 04 DKK 745.98 745.93-5 PLN 418.22 418.89 0.67 JPY 96.32 96.48 0.16 1 day 1.89 1 month 8 GBP 155.15 154.90-0.25 1 month -1.28 Year-to-date 1.32 CHF 92.14 92.40 0.26 Year-t-date -9.63 * The chart plots 07:30-23:00 Fri and 23:00 Sun to 07:30 Mon STOCKS FX & COMMODITIES YIELDS & INTEREST RATES USD-Yields Intraday Spread, 0.32 P o licy R ate 3M bp 17:00 07:30 +/-, bp USD2Y USD10Y USD 0.25 0.26 1 USD 10Y 2.60 8-2 0.31Max 0.3 Max 2.6 EUR 0 0.23-27 USD 30Y 3.66 3.64-2 Min 0.3 Min 2.6 2.60 GBP 0 1 1 JPY 10Y 0.76 0.75-1 0.30 0.29 0 0 8 DKK SEK 0.20 0 0.26 1.20 6 20 07:30(-1)* 17:00 +/-, bp NOK 0 1.73 23 DEM 10Y 1.70 1.68-2 0.28 07 10 13 16 19 22 01 04 0.40 0.10-0 -0.80 134.0 133.1 6 0.90-0.10 Eurostoxx Intraday, % -0.60-0.6 09 10 11 12 13 14 15 16 17 18 Grey line indicates opening of US markets PLN 0 2.60 10 DKK 10Y 1.85 1.82-3 +/- +/- SEK 10Y 2.19 2.20 2 USD2Y (lhs) USD10Y (rhs) NOK 10Y 2.71 2.71 0 PLN 10Y 4.15 4.13-2 * The chart plots 07:30-23:00 Fri and 23:00 Sun to 07:30 Mon * As of closing previous trading day 0.9-0.1 07:30 07:30 Close Close 15426 3660 Go ld, $ 1329.40 CRB 1M future 285.38 0.6% 0.4% 0.2% -% -0.2% -0.4% Oil, B rent, $ 108.06-0.16-0.75-5 C R B, R aw Industrials 525.49 1.97 5.16-4.91 0.90 - - 10Y Yield Spread to Germany -0.93 0.78 5 1 2 0.14 3 2.44 USDJPYGBPFRF ITL DKKSEKNOKPLN - - - - US Yield Curve ## M ax 0.430-0.8 ## M ax ### 0.8 ## M in -1.790 ## M in ### 0.2-0.3-1.3-1.8 USD2Y USD5Y USD10Y D-t-D +/-, bp (right axis) 07:30 (left axis) 1 month ago (left axis) 1.8 1.6 1.4 1.2 German Yield Curve -0.3-0.8-1.3 0.6 0.4-1.8 0.2-2.3 DEM2Y DEM5YR DEM10Y D-t-D +/-, bp (right axis) 07:30 (left axis) 1 month ago (left axis) USD 17:00 07:30 +/- C redit spread, it raxx s. 11* Credit spreads Swap Spread, bp** 160 700 17:00 07:30 +/- 07:30 1 day 1 month 140 600 USD 10Y Europe (IG) 96 0-13 120 500 JPY 10Y 17 17 0 100 HiVol 153 0-13 400 80 Xover (N-IG) 402 2-37 300 07:30(-1)* 17:00 +/- 60 40 20 200 100 EUR 10Y DKK 10Y 0 34 33-1 Finan. Sr. 138 1-24 0 0 SEK 10Y 44 42-2 Finan. Sub. 216 0-28 Aug Sep Nov Dec Feb Mar May Jun NOK 10Y 49 49-1 Non-finan. 28 0-1 itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) * Ask price ** Ask price * As of closing previous trading day 3 12 August 2013
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