Investment Research General Market Conditions 21 August 2013 Danske Daily Market movers today The main focus will be the release of the Fed minutes from the July FOMC-meeting. The statement from the July meeting was slightly more dovish on the inflation outlook, so it will be interesting to see what caused the change in tone. According to the June minutes half of the FOMC members preferred to end the QE programme this year. It will also be interesting to see if this has changed. The data calendar is relatively light. The main release is existing home sales in the US. Mortgage rates in the US have increased markedly, so any signs of softness in the housing market could be an argument for delaying Fed tapering. Otherwise attention continues to be on the development in emerging markets. China s HSBC manufacturing PMI - to be released early tomorrow morning before markets open in Europe - will be very important for overall market sentiment towards emerging markets. We expect a slight improvement in China's HSBC PMI. Selected market news Momentum in the ongoing emerging markets sell-off slowed down and Asian equity markets traded mixed overnight with markets in India and Taiwan closed. However, emerging markets woes are likely to continue to remain on top of the agenda as the start of the Fed s tapering moves closer. Today s release of the FOMC minutes from the July meeting might deliver yet another punch to risk sentiment if markets get the sense that tapering already in September looks increasingly likely. Yesterday the Turkish central bank surprised markets with a 50bp interest rate hike in order to support the lira. However, although speculations that the Fed tapering is imminent has been the catalyst for the ongoing sell-off in developing countries, a weaker growth outlook for these countries combined with deteriorating current accounts and government finances are also part of the reason why investors have become increasingly concerned and hence tighter monetary policy might not be the right medicine in this scenario. Yesterday the German election campaign moved up a gear when German Finance Minister Wolfgang Schäuble said that a third bailout for Greece will be needed. Schaüble has previously warned about another bailout for Greece and while his statement on Greek debt is probably not shocking news, it is interesting that the European debt crisis now seems to become a theme in the German election. So far, Bundeskanzler Angela Merkel has eagerly avoided talking about Germany s role in future bailouts. However, if rhetoric on the debt crisis sharpens during the German election campaign, there is a risk that the European debt crisis could re-emerge and put some pressure on peripheral bonds and the euro. 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 07:30 1 day +/-,% S&P500 (close) 1652.4 0.38 S&P500 fut (chng from close) 1647.8-0.17 Nikkei 13357.1-0.29 Hang Seng 21724.9-1.12 17:00 07:30 +/-, bp US 2y gov 0.34 0.34 US 10y gov 2.82 2.82 0.1 itraxx Europe (IG) 102 103 0.3 itraxx Xover (Non IG) 423 424 1.2 +/-, % EUR/USD 1.343 1.342-5 USD/JPY 97.120 97.500 0.39 EUR/CHF 1.23 1.23-9 EUR/GBP 0.856 0.857 7 EUR/SEK 8.698 8.716 0.20 EUR/NOK 7.98 7.99 0.13 USD Oil Brent, USD 109.6 109.8 0.18 Gold, USD 1374.2 1368.5-0.41 Selected readings from Danske Bank EM Bond Snapshot: Headwinds weigh on the portfolio Senior Analyst Morten Helt +45 45 12 85 18 mohel@danskebank.dk Important disclosures and certifications are contained from page 4 of this report.
Scandi markets today No key events today. Fixed Income markets Following a sharp sell-off over the past weeks core bond markets showed some signs of stabilisation yesterday amid deteriorating global risk sentiment. We believe that US rates markets are close to fully discounting a start to tapering in September. Today s release of the FOMC minutes should shed more light on the Fed s thinking on this issue. We were surprised not to see any specific mentioning of the likely timing of a start to tapering in the meeting statement. If the minutes indicate that tapering in September is still not a done deal, it could leave some room for lower long-end rates. In the fixed income markets Sweden is tapping SEK3.5bn 3.5% Nov-23 and Germany is printing EUR5bn DBR Sep- 15. US S&P500 future 1691 1691 1681 1681 1671 1671 1661 1661 1651 1651 1641 1641 US 10y gov yield 2.90 2.9 2.80 2.8 FX markets Today s main event will be the release of the FOMC minutes from the July meeting. The report might not trigger any significant moves in EUR/USD, as the QE tapering in itself is not enough to start a bigger dollar appreciation, which - in our view - will require support from relative rates stemming from a steepening of the US money market curve. However, indications in the FOMC minutes that tapering is moving closer could weigh on risk sentiment and lead to further near-term suffering for EM currencies. Another currency that suffered yesterday was the Norwegian krone after the release of a disappointing Q2 mainland GDP report. While the weaker-than-expected Q2 GDP will probably not trigger a rate cut from Norges Bank, speculation about this will return and given that nothing was priced in before yesterday s GDP number, risks are probably skewed towards further upside in EUR/NOK and a lower NOK/SEK in the near term. 2.70 2.7 2.60 2.6 0 Global FX EUR/USD (LHS) USD/JPY (RHS) 1.35 98.5 1.34 97.8 1.33 97.1 1.32 96.4 Key figures and events Wednesday, August 21, 2013 Period Danske Bank Consensus Previous 9:00 DKK ILO-unemployment s.a. K (%) 2nd quarter 209 (7.4%) 10:00 ITL Italy's Letta and Austria's Faymann meet 10:30 GBP Public Finances (PSNCR) GBP bn Jul 3.1 11:00 EUR ECB announces allotment in 7-day (USD) 13:00 USD MBA Mortgage Applications 16:00 USD Existing home sales m (m/m) Jul 5.13 (0.9%) 5.08 (-1.2%) 20:00 USD Minutes from FOMC meeting Source: Bloomberg, Danske Bank Markets Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) 8.74 7.99 8.70 7.92 8.66 7.85 8.62 7.78 2 21 August 2013
Today s market data: 21 August 2013 0.90 0 0.10 S&P500 Intraday, % STOCKS DJSTOXX50 Max 1.1 Max OM XC20 568 Min -0.3 0-0.70 Min -0.7 OM XS30 1247 0.4 0.4 OSE BX 498 15 16 17 18 19 20 21 Grey line indicates closing of Danish markets DOW JONES NASDAQ 1 month -2.3% 1 month -0.2% S&P500 1652 2706-0.6% Year-to-date 15.9% Year-to-date 5.0% NIKKEI (07:30) 13357-0.6% FX & COMMODITIES EUR 17:00 07:30 +/- USD 134.28 134.21-7 07:30 1368.47 109.76 134.3 134.3 JPY 130.41 130.84 0.43 1 day -2.70-0.39 Max ## GBP 85.64 85.69 6 1 month 72.37 1.69 133.9 Min ## 133.9 NOK 797.86 798.92 6 Year-t-date -306.88-1.35 0.4 SEK 869.82 879 1.77 133.5 133.5 DKK 745.79 745.82 3 CRB C R B, R aw PLN 422.87 423.14 0.27 JPY 97.12 97.50 0.38 1 day -2.73 1 month 2.35 GBP 156.80 156.61-0.19 1 month 8 Year-to-date 2.28 CHF 91.76 91.73-3 Year-t-date -4.67 YIELDS & INTEREST RATES Go ld, $ 1M future USD-Yields Intraday Spread, 0.36 P o licy R ate 3M bp 17:00 07:30 +/-, bp 2.85 USD2Y USD10Y USD 0.25 0.26 1 USD 10Y 2.82 2.82 0 0.35Max 0.4 Max 2.9 EUR 0 0.23-28 USD 30Y 3.86 3.86 0 Min 0.3 Min 2.8 2.83 GBP 0 1 1 JPY 10Y 0.74 0.74-1 0.34 0.33 0 0 2.81 DKK SEK 0.20 0 0.27 1.20 7 20 07:30(-1)* 17:00 +/-, bp NOK 0 1.72 22 DEM 10Y 1.87 1.84-3 0.32 07 10 13 16 19 22 01 04 USD2Y (lhs) EUR/USD Intraday 133.1 07 10 13 16 19 22 01 04 USD10Y (rhs) 0.90 0.10 133.1 2.79-1.10 Eurostoxx Intraday, % 0 09 10 11 12 13 14 15 16 17 18 Grey line indicates opening of US markets -0.3-1.1 07:30 Close Close 15003 290.34 PLN 0 2.60 10 DKK 10Y 2 1.99-3 3614 % -0.3% -% +/- +/- -0.1% 0.7% 0.4% Oil, B rent, $ Industrials 526.59 SEK 10Y 2.43 2.38-5 NOK 10Y 2.89 2.89 0-1 6.30-3.81 PLN 10Y 4.48 4.36-13 * As of closing previous trading day 0.98-10Y Yield Spread to Germany -1.10 0.83 6 2.47 5 0.16 5 2 USDJPYGBPFRF ITL DKKSEKNOKPLN - US Yield Curve ## M ax 00-0.4 ## M ax ### 0.8 ## M in -0.730 ## M in ### -0.1-0.2-0.3-0.6-0.7 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 - 0.6-0.4 0.2 - - 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) 103-1 5 120 500 JPY 10Y 19 19 0 100 HiVol 157 1 3 400 80 Xover (N-IG) 424-3 31 300 07:30(-1)* 17:00 +/- 60 40 20 200 100 EUR 10Y DKK 10Y 0 31 30-1 Finan. Sr. 147 1 5 0 0 SEK 10Y 39 40 1 Finan. Sub. 224 2 8 Aug Oct Nov Jan Feb Apr May Jul Aug NOK 10Y 46 47 0 Non-finan. 23 2-5 itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) * Ask price ** Ask price * As of closing previous trading day 3 21 August 2013
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