Investment Research General Market Conditions 01 December 2014 Danske Daily Market movers today In Europe focus will be on the manufacturing PMIs for November. The most interesting will be the first estimates for the manufacturing PMIs in the peripheral countries. The preliminary estimates for the euro area as a whole suggest that the periphery improved in November. In the US we expect the ISM manufacturing PMI to have declined to 57.5 (consensus: 58.0) in November from 59.0 in the previous month. The ISM manufacturing PMY has recently been elevated and has been overshooting actual production, suggesting there could be some downside to ISM manufacturing in the coming months. That said, the regional manufacturing surveys have been mixed in November but on balance indicate a decline. In the US there is a number of important Fed-speeches in the calendar today with both vice-chairman Stanley Fischer (voter, neutral) and New York Fed president William Dudley (voter, dove) scheduled to speak. Selected market news On Saturday ECB Executive Board member and former Bundesbank vice president Sabine Lautenschlaeger in Berlin said that she does not think that quantitative easing is the right policy for the euro zone currently. Even though it is well known that the Germans are sceptical about quantitative easing, this is nonetheless likely to reduce the hopes in the markets for more dramatic action from the ECB to ease its monetary policy. Swiss central bankers are undoubtedly relieved that the Swiss voters in a referendum on Sunday rejected the so-called Save the Swiss Gold-initiative, which among other things would have forced the Swiss central bank to increase its holding of gold. Even though the result was expected, it will probably ease the appreciation pressure on the Swiss franc, see more below. This morning the gold price dropped around 2%, while the silver price is down as much as 6%. The continued sharp drop in the oil price on Sunday triggered a major sell-off in most stock markets in the Gulf states. Hence, the stock markets in both Saudi Arabia and Dubai dropped close to 5% in Sunday s trade. Overnight the drop in the oil price has continued, which is putting even more pressure on commodity currencies such as the Norwegian krone and the Russian rouble. The oil price is also hit this morning by weaker-than-expected PMI numbers out of China. The PMI dropped to 50.3 in November the lowest reading in eight months. The data are also weighing on most Asian stock markets this morning. Market overview USD Olie Brent, USD 72.7 68.4-5.96 Guld, USD 1181.7 1151.9-2.52 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 07:30 1 dag,% S&P500 (lukning) 2067.6-0.25 S&P500 fut (ændr. fra lukning) 2059.3-0.34 Nikkei 17569.4 0.63 Hang Seng 23520.2-1.95 17:00 07:30, bp US 2 års stat 0 0.48-1.2 US 10 års stat 2.20 2.17-2.6 itraxx Europe (IG) 58 58 0.4 itraxx Xover (Non IG) 319 320, % EUR/USD 1.245 1.245-1 USD/JPY 118.73 118.89 0.13 EUR/CHF 1.20 1.20 0.17 EUR/GBP 0.796 0.797 0.22 EUR/SEK 9.271 9.287 0.18 EUR/NOK 8.71 8.76 0.64 Selected readings from Danske Bank The Big Picture: Synchronous global recovery in H1 15, 1 December Weekly Focus: OPEC disagreements good news for private consumers, 28 November We expect euro inflation to decline to 0.1% in December, 28 November T Chief Analyst Lars Christensen +45 45 12 85 30 larch@danskebank.dk Important disclosures and certifications are contained from page 5 of this report. www.danskeresearch.com
Scandi markets Swedish PMI manufacturing at 08:30. The odd thing is that while NIER manufacturing has trended upwards in recent months, PMI has trended in the opposite direction, currently signalling growth below trend. Fact is that hard production data are trending south, October industrial figures will be released on Friday. Fixed income markets In the government bond market the ECB meeting is in focus this week as the market is pricing in further easing measures. We expect Draghi to do his best to sound dovish - helped by downward revisions of inflation and growth outlook but that no new measures will see the light before next year. Further, in the light of the hawkish comments from Executive Board member Sabine Lautenschlaeger, who said QE in government bonds is not the right policy choice for the euro area currently, we could see some short-term setbacks in the periphery markets as these comments might fuel a bit of profit taking. Also German Bunds could correct a bit lower following a strong rally. Today, the first release of peripheral manufacturing PMIs is set to confirm that Irish growth is booming, Spain s recovery is on track while Italy is still lagging. The peripheral market is currently not very sensitive to growth figures, though. Friday was characterised by more mixed sentiment after a strong rally during the week, where 10Y yields hit new lows across EGB sovereigns. The most noteworthy was a10-30 flattening in both semi-core and the periphery with the biggest move in Spain of 5bp. The curve in both Italy and Spain remains very steep and we expect that the flattening has further to go. Today's CBPP3 data will likely be inflated due to the large number of primary market issues settling last week. The seven transactions amount to a total of EUR7.3bn, of which the ECB may have purchased up to EUR3bn for CBPP3, as other investors increasingly are being crowded out. We estimate that secondary market purchases in the previous week declined to some EUR400m a day, and if this pace is maintained, we would thus look for a total increase of EUR5bn. This takes the CBPP3 portfolio value to EUR17.7bn and would be the largest weekly increase recorded so far. FX markets Yesterday s rejection of the Save the Swiss Gold-initiative means that the Swiss central bank SNB can continue its policy of maintaining price stability through a flexible balance sheet. While we for a long time have argued that the EUR/CHF 1.20 floor would hold irrespective of the outcome, the vote does ease some of the imminent pressure on the SNB. Indeed, the SNB sent out a policy statement saying that the bank was pleased to hear of the outcome, that it will continue to enforce the minimum exchange rate with the utmost determination and that it will take further measures immediately if required. We do, however, expect the bounce in EUR/CHF to be short-lived as speculations of further ECB measures will likely return the heat on the SNB. US S&P500 future 2075 2075 2065 2065 2055 2055 2045 2045 2035 2035 Thu Fri Mon Wed Thu Mon US 10y gov yield 2.41 2.41 2.31 2.31 2.21 2.21 2.11 2.11 Thu Fri Mon Tue Fri Mon Global FX 1.266 EUR/USD (LHS) USD/JPY (RHS) 119 1.256 118.4 1.246 117.8 1.236 117.2 Thu Fri Tue Wed Thu Mon Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) 8.80 9.30 8.70 9.27 8.60 9.24 8.50 9.21 8.40 Thu Fri Tue Wed Fri With the OPEC s decision to keep production unchanged on Thursday and with Friday s weak results of Norges Bank's regional network survey, the NOK keeps taking a beating. While we fundamentally regard the current level as attractive to position for an eventual stronger NOK, we prefer to stay sidelined as it is difficult to catch a falling knife. We expect EUR/NOK to remain choppy and volatile in the remainder of 2014. 2 01 December 2014 www.danskeresearch.com
Key figures and events Monday, December 1, 2014 Period Danske Bank Consensus P 2:00 CNY Manf.PMI Index Nov 50.6 5 2:35 JPY Markit/JMMA manufacturing PMI, final Index Nov 2:45 CNY HSBC manf. PMI, final Index Nov 5 8:30 SEK PMI Index Nov 52.6 9:00 NOK PMI Index Nov 5 9:15 ESP PMI manufacturing Index Nov 9:30 SEK Wages (blue collars/white collars) y/y Sep 9:30 CHF PMI manufacturing Index Nov 52.7 9:45 ITL PMI manufacturing Index Nov 5 48.5 9:50 FRF PMI manufacturing, final Index Nov 47.6 47.7 9:55 DEM PMI manufacturing, final Index Nov 5 5 10:00 NOK Credit indicator (C2) y/y Oct 5.40% 10:00 ITL GDP, final q/q y/y 3rd quarter -0.10%.. -0.1 10:00 EUR PMI manufacturing, final Index Nov 50.4 50.4 10:30 GBP Broad money M4 m/m y/y Oct -0.7 15:45 USD Markit manufacturing PMI, final Index Nov 55.0 16:00 USD ISM manufacturing Index Nov 57.5 57.8 16:00 USD ISM prices paid Index Nov 52.8 18:15 USD Fed's Dudley (voter, dovish) speaks 19:00 USD Fed's S.Fisher (voter, neutral) speaks Source: Bloomberg, Danske Bank Markets 3 01 December 2014 www.danskeresearch.com
Today s market data: 01 December 2014-0.60 DOW JONES NASDAQ 1 month 2.5% 1 month 2.6% S&P500 2068-0.3% Year-to-date 11.9% Year-to-date 5.3% NIKKEI (07:30) 17569 % EUR 17:00 07:30 USD 124.49 124.48-1 07:30 1151.91 JPY 147.81 147.99 0.18 1 day -15.49 124.7 Max 125 124.7 GBP 79.55 79.73 0.17 1 month -21.57 Min 124 NOK 870.81 876.35 5.54 Year-t-date -53.74 124.4 0.3 124.4 SEK 927.07 928.74 1.67 * The chart plots 07:30-23:00 Fri and 23:00 Sun to 07:30 M on STOCKS -0.60 15 16 17 18 19 20 21 Grey line indicates closing of Danish markets EUR/USD Intraday -1.10-1.1 09 10 11 12 13 14 15 16 17 18 Grey line indicates opening of US markets FX & COMMODITIES DKK 744.08 744.15 7 YIELDS & INTEREST RATES Gold, $ USD-Yields Intraday Spread, 2.23 Policy Rate 3M bp 17:00 07:30, bp 1 USD2Y USD10Y USD 0.25 0.23-2 USD 10Y 2.20 2.17-3 Max Max 2.2 2.21 EUR 5 8 3 USD 30Y 2.91 2.89-1 0.49Min Min 2.2 GBP 0 5 5 JPY 10Y 0.42 0.43 1 0 USD2Y 2.19 (lhs) 0 DKK 0.20 0.31 11 0.47 USD102.17 SEK 0 0.27 27 07:30(-1)* 17:00, bp Y (rhs) NOK 1.50 1.63 13 DEM 10Y 0.70 0.70 0 0.45 2.15 07 10 13 16 19 22 01 04 PLN 2.00 1.96-4 DKK 10Y 0.93 0.93-1 SEK 10Y 1 2 1 S&P500 Intraday, % Eurostoxx Intraday, % Close 0.30 0.30 0.40 0.4 DJSTOXX50 3076 % Max 0.4 Max 0.6 OMXC20 761-0.2% 0 Min -0.6 0-0.10 Min -1.1-0.1 OMXS30 1461-0.3% 0.3 OSE BX 566-2.7% -0.30-0.30-0.60-0.6 Oil, Brent, $ NOK 10Y 1.88 1.88 0 PLN 10Y 2.42 2.38-4 * The chart plots 07:30-23:00 Fri and 23:00 Sun to 07:30 M on * As of closing previous trading day Close 17828 4792 CRB % 0.1% 68.36-1.79-17.50-42.44 CRB, Raw 10Y Yield Spread to Germany 2.0 1.68 1.47 1.5 1.23 1.33 1.18 0.27 0.23 0.32 USD JPY GBP FRF ITL DKKSEK NOKPLN - -0.27 2.0 1.5 - US Yield Curve German Yield Curve 3.0-0.2 2.5 0.9-0.7 0.8 2.0-1.2 0.7 1.5 0.6-1.7 3.00 Max 00 0 Max 00-2.2 0.4 0 Min -3.150 0.3 0 Min 00-2.7 0.2-3.2 0.1 USD2Y USD5Y USD10Y D-t-D, bp (right axis) 07:30 (left axis) 1 month ago (left axis) DEM2Y DEM5YR DEM10Y D-t-D, bp (right axis) 07:30 (left axis) 1 month ago (left axis) 0.9 0.8 0.7 0.6 0.4 0.3 0.2 0.1 Non-finan. Credit spread, itraxx s. 11* 07:30 1 day 1 month 90 80 70 Credit spreads USD 10Y * Ask price ** Ask price Swap Spread, bp** Europe (IG) 58 0-8 60 300 JPY 10Y 13 14 1 HiVol 65 0-11 50 250 40 200 Xover (N-IG) 320 0-40 07:30(-1)* 17:00 30 150 EUR 10Y 0 17 17 20 100 10 50 DKK 10Y 21 22 1 Finan. Sr. 60 0-8 0 0 SEK 10Y 29 30 1 Dec Jan Mar Apr May Jul Aug Oct Nov Finan. Sub. 140 0-19 NOK 10Y 31 32 1 itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) 450 400 350 17:00 * As of closing previous trading day 07:30 124.1 124.1 PLN 418.02 418.21 0.19 1M future Industrials 07 10 13 16 19 22 01 04 USD 17:00 07:30 07:30 254.37 504.51 JPY 118.73 118.89 0.16 1 day -12.28-1.55 1 month -0.34 GBP 156.50 156.14-0.36 1 month -17.59-6 Year-to-date -12.95 CHF 96.50 96.67 0.17 Year-t-date -25.80-28.23 4 01 December 2014 www.danskeresearch.com
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