Investment Research General Market Conditions 17 September 2013 Danske Daily Market movers today German ZEW expectations will show a strong improvement in September according to our model, which is primarily driven by the Sentix index. The consensus expectation is for a smaller lift in sentiment. Euro area trade data will give further insight into the strength of the euro area s fragile recovery. Plenty of ECB speeches today: Nowotny in Vienna, Liikanen in Helsinki and Praet in London and Brussels. We will listen for signals suggesting that the Governing Council could be preparing to offer a new LTRO. US NAHB housing market index could decrease slightly. Recent indicators such as mortgage applications suggest that the sharp increase in mortgage rates is beginning to affect housing activity. US inflation details are expected to show that core prices increased by 0.1% m/m in September and 1.8% y/y, which is still subdued. Scandi events. No major events or key economic data today. Selected market news The surprising withdrawal by Larry Summers as candidate for Fed chairman was the big market mover yesterday and triggered decent gains in both risk assets and the bond market. Market thinking is that the withdrawal of Summers candidacy makes current Vice Chairman Janet Yellen the favourite again and hence makes a continuation of the Fed s current dovish approach more likely. In other words, there is a greater probability that a sweet spot will remain where risk assets are supported on one side by robust economic data and on the other by the prospect of less tapering should economic data prove less stellar. The Summers rally faded, however, during US trading and the S&P500 closed with a small 0.6% gain. Also the bond market and the dollar gave back most of the initial gains and the 10-year US Treasury yield is trading back above 2.86% after reaching an intraday 2.78% low. 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 shows 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 Scandi Markets ahead 07:30 1 day +/-,% S&P500 (close) 1697.6 7 S&P500 fut (chng from close) 1688.9-0.14 Nikkei 14327.8-3 Hang Seng 23189.2-0.27 17:00 07:30 +/-, bp US 2y gov 0.38 0.39 0.4 US 10y gov 2.80 2.86 6.3 itraxx Europe (IG) 94 95 itraxx Xover (Non IG) 377 379 1.7 +/-, % EUR/USD 1.336 1.334-0.16 USD/JPY 98.830 99.230 0.40 EUR/CHF 1.24 1.24 1 EUR/GBP 0.838 0.839 8 EUR/SEK 8.665 8.684 0.22 EUR/NOK 7.88 7.88-5 USD Oil Brent, USD 110.1 109.6-0.41 Gold, USD 1316.8 1313.1-0.28 Focus now turns to the FOMC meeting, which will begin today. And even if we already knew that a withdrawal of the Fed s QE is a delicate matter for risk markets, the noise caused yesterday by Summers announcement shows just how sensitive markets are. For a preview of the FOMC meeting, see Three dilemmas facing the Fed, 16 September. Senior Analyst Kasper Kirkegaard +45 45 13 70 18 kaki@danskebank.com Important disclosures and certifications are contained from page 4 of this report.
Scandi markets today No major events or key economic data today. Fixed income markets After an initially strong relief rally on back of Larry Summers withdrawal from the nomination of Fed chairman, the US bond market gave back some of the gains late in the session. This most likely reflects that the markets are now focused on the upcoming FOMC announcement tomorrow, which by itself embeds plenty of event risk. Hence the full impact of the withdrawal by Summers is only likely to play through if the Fed manages to deliver a bond friendly package tomorrow. In the meantime, the EUR money market will be watching today s ECB speeches carefully. It is still not entirely clear what the ECB s reaction function looks like. Any new information about under what conditions and how the ECB will intervene in the markets to keep rates low would be critical. In the fixed income space, Denmark is printing 2023 nominal bonds and linkers. FX markets The initial dollar sell-off as Larry Summers left the Fed chairman race was perhaps a bit overdone and the dollar index reduced a 0.6% loss to a 0.3% loss later during US trading. However, focus is now on the FOMC meeting, which should be a market-moving event for the currency market this week. Positioning appears to be overall neutral, which leaves risks fairly symmetrical and if anything perhaps a bit to the upside on EUR/USD. While the announcement of reduced QE should be dollar positive, the Fed is widely expected to do what it can to keep rate expectations in check. And since short-term rate spreads are the dominant driver of FX, the dollar is at risk from coming out weaker if the Fed is successful in convincing investors that QE may be reduced, but that the first rate hike is still far away. US S&P500 future 1704 1694 1684 1674 1664 1654 1644 1634 Fri Thu Fri Mon Mon Tue US 10y gov yield 4 2.94 2.84 Global FX 1704 1694 1684 1674 1664 1654 1644 1634 4 2.94 2.84 2.74 2.74 Fri Mon Tue Thu Fri Tue 1.34 1.33 1.32 EUR/USD (LHS) USD/JPY (RHS) 100.6 99.9 99.2 1.31 98.5 Fri Mon Wed Thu Fri Tue Key figures and events Tuesday, September 17, 2013 Period Danske Bank Consensus Previous 3:30 AUD RBA September minutes 9:00 EUR ECB's Nowotny speaks in Vienna 10:00 EUR ECB's Liikanen speaks in Helsinki 10:00 EUR Current account EUR bn Jul 16.9 10:30 GBP PPI - Input m/m y/y Aug 0.2% 3.1% 1.1% 5.0% 10:30 GBP PPI - Output m/m y/y Aug 0.2% 1.8% 0.2% 2.1% 10:30 GBP CPI m/m y/y Aug % 2.7% % 2.7% 11:00 DEM ZEW economic sentiment Index Sep 48.0 45.5 4 11:00 DEM ZEW current situation Index Sep 2 20 18.3 11:00 EUR Trade balance EUR bn Jul 14.9 14:30 USD CPI m/m y/y Aug 0.2% 0.2% 0.2% % 14:30 USD CPI ex. food & energy m/m y/y Aug 0.1% 1.8% 0.1% 1.8% 0.2% 1.7% 15:00 USD TICS international capital flow, Net inflow USD bn Jul -19.0 16:00 USD NAHB Housing Market Index Index Sep 58 59 59 19:00 EUR ECB's Praet speaks in Brussels Source: Bloomberg and Danske Bank Markets Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) 8.77 8.73 8.69 8.65 Fri Mon Wed Thu Fri 8.06 8.00 7.94 7.88 7.82 2 17 September 2013
Today s market data: 17 September 2013 1.30 0.90 0 0.10 DJSTOXX50 2794 % Max 1.3 0.90 0 Max 1 OM XC20 569 % Min -0.3 Min -0.2 OM XS30 1278 % 0 0.60 0.6 0.4 0.4 OSE BX 507 % -0.30 15 16 17 18 19 20 21 Grey line indicates closing of Danish markets 134.0 DOW JONES NASDAQ 1 month % 1 month 2.1% S&P500 1698 Year-to-date 19.0% Year-to-date 8.4% NIKKEI (07:30) 14328 % EUR 17:00 07:30 +/- USD 133.56 133.35-0.21 07:30 JPY 130 132.33 0.33 1 day 0.15 133.7 Max ## 133.7 GBP 83.81 83.88 6 1 month -63.73 Min ## NOK 788.03 787.66-0.37 Year-t-date -362.21 133.4 0.3 133.4 SEK 866.48 868.40 1.92 DKK 745.67 745.80 0.13 PLN 419.49 420.14 0.65 JPY 98.83 99.23 0.40 1 day -6 1 month 0 GBP 159.36 158.98-0.38 1 month -3 Year-to-date 2 CHF 93 92.68 0.15 Year-t-date -5.55 USD-Yields Intraday Spread, P o licy R ate 3M bp 17:00 07:30 +/-, bp USD2Y USD10Y 2.89 USD 0.25 0.25 0 USD 10Y 2.80 2.86 6 0.43 Max Max 2.9 EUR 0 0.22-28 USD 30Y 3.80 3.86 6 Min 0.3 Min 2.8 2.85 GBP 0 2 2 JPY 10Y 0.73 0.73 0 0.40 0 0 DKK 0.20 0.27 7 0.37 S&P500 Intraday, % 0.34 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) 1.30 0.10-0.30 134.0 133.1 2.81 2.77 0 0.20 SEK STOCKS Eurostoxx Intraday, % -0.20-0.2 09 10 11 12 13 14 15 16 17 18 Grey line indicates opening of US markets FX & COMMODITIES YIELDS & INTEREST RATES 0 1.22 22 0.2 07:30 07:30(-1)* Close Close 15495 Go ld, $ 1313.14 CRB 1M future 289.46 17:00 NOK 0 1.74 24 DEM 10Y 1.94 1.93 0 PLN 0 2.60 10 DKK 10Y 9 9 0 3718 +/- +/- 0.8% -0.1% 0.6% Oil, B rent, $ 109.62-0.45-0.78-9 C R B, R aw Industrials 520.42 +/-, bp SEK 10Y 2.65 2.60-5 NOK 10Y 3.14 3.14 0 0.87-8.97-9.98 PLN 10Y 4.49 4.40-9 * As of closing previous trading day 0.92 - - 10Y Yield Spread to Germany -1.21 0.94 5 2 0.16 0.66 1.20 2.46 USDJPYGBPFRF ITL DKKSEKNOKPLN - - - - US Yield Curve 2.4 0.4-0.6-1.6 ## M ax 2.820-2.6 ## M ax 1.200 ## M in -6.620-3.6 0.8 ## M in ### USD2Y USD5Y USD10Y D-t-D +/-, bp (right axis) 07:30 (left axis) 1 month ago (left axis) -4.6-5.6-6.6 1.8 1.6 1.2 German Yield Curve 1.1 0.9 0.7 0.6 0.3 0.4 0.2 0.1-0.1 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) 95-4 -9 120 500 JPY 10Y 16 16 0 100 HiVol 147-4 -9 400 80 Xover (N-IG) 379-14 -47 300 07:30(-1)* 17:00 +/- 60 40 20 200 100 EUR 10Y DKK 10Y 0 26 26 0 Finan. Sr. 133-6 -13 0 0 SEK 10Y 39 38 0 Finan. Sub. 202-8 -20 Sep Nov Dec Feb Mar May Jun Aug Sep NOK 10Y 35 36 1 Non-finan. 18-5 -4 itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) * Ask price ** Ask price * As of closing previous trading day 3 17 September 2013
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