Investment Research General Market Conditions 19 June 2013 Danske Daily Market movers today FOMC meeting: In addition to the normal statement, the Fed will publish FOMC members projections for growth and the Fed funds rate, followed by a press conference with Chairman Ben Bernanke. He is likely to once again stress that QE tapering is not a tightening of monetary policy but rather a reduction in monetary easing and that QE tapering will not imply that the Fed has moved the timing of its first rate hike closer (see FOMC preview: Once again Bernanke faces a communication challenge). Minutes from the June Bank of England meeting: The May minutes showed unchanged positions with a minority of three members voting for more QE. We expect this to have been unchanged at Governor King s final MPC meeting. The Swedish government is selling a 5.7% stake in Nordea (around SEK18bn) and will use the proceeds to reduce the national debt. If there is a large foreign investor take-up, this should, on the margin, be SEK positive. June confidence surveys and May unemployment are also due to be published today. For more on Scandi markets see page 2. Selected market news Japanese markets are higher this morning and the yen weaker (USD/JPY trades above 95) following better-than-expected May export data. Looking at the trade deficit, this remained in red for the 27th consecutive month coming in at JPY994bn. The Japanese economic surprise index is currently at its highest level since early 2011, illustrating that Abenomics is beginning to affect the real economy even as investors have recently priced out some confidence in the BoJ s inflation target. Other markets are generally lower in Asia. US treasuries moved more or less sideways yesterday in cautious trading ahead of today s FOMC announcement and following slightly lower-than-expected housing starts. Note that overall the US housing market is still showing strong recovery signs. EUR/USD has traded above 1.34 for the first time since February as trading accounts have been unwinding short positions and the euro money market curve has steepened. In general, the dollar has weakened recently and is now down against all G10 currencies (with the exception of AUD and NZD) since peaking in late June with over 5% losses against JPY and CHF. Positioning is part of the story as investors went into the weak ISM report near record long the dollar according to the IMM data. 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 1 day,% S&P500 (close) 1651.8 0.78 S&P500 fut (chng from close) 1642.9-0.14 Nikkei 13124.2 0.90 Hang Seng 20966.9-1.22 17:00, bp US 2y gov 0.27 0.26-0.8 US 10y gov 2.20 2.18-1.3 itraxx Europe (IG) 108 109 itraxx Xover (Non IG) 443 445 1.4, % EUR/USD 1.340 1.340-7 USD/JPY 95.530 95.290-0.25 EUR/CHF 1.23 1.23-2 EUR/GBP 0.858 0.857-0.17 EUR/SEK 8.673 8.642-0.35 EUR/NOK 7.70 7.69-8 USD Oil Brent, USD 105.6 106.1 0.45 Gold, USD 136 1365.3 0.17 Emerging Markets Briefer June 2013 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 There are several important events on the Swedish agenda today. First a new macro forecast from the National Institute of Economic Research (NIER) followed by business and consumer confidence surveys where we expect to see some improvements in manufacturing and consumer sentiment. Finally, May unemployment data is expected to remain elevated as a result of significant inflows to labour supply. Fixed income markets We expect Fed Chairman Bernanke to repeat that the timing of QE tapering is completely data dependent and to give no more precise indications than to repeat that if the labour market continues to improve, QE tapering could start within the next few meetings. Given the selling pressure in Treasury markets going into the meeting, we judge that such an outcome would be fairly neutral for the markets and treasuries might even get a bit of support from this. If downside risks to inflation are emphasised, it should be a pretty benign environment for general risk appetite and treasuries might rally a bit more. In the less likely scenario where the FOMC more directly says it plans tapering by the September meeting, it will probably keep pressure on the Treasury and Mortgage Backed Securities (MBS) markets. In the rather unlikely event that FOMC starts tapering at today s meeting, the sell-off in Treasuries could be violent. FX markets Going into today s FOMC meeting, the dollar has been weakening against not least the JPY and EUR and the DXY dollar index is now down 4% from its late May peak. This recent weakness has coincided with some reduction in speculative long dollar positions and it should be noted that the move in EUR/USD to 1.34 has seen net EUR/USD positions return to broadly neutral levels according to the IMM data. This leaves risks more symmetrical and a hawkish FOMC should thus be able to send EUR/USD lower by about the same amount as a dovish FOMC should be able to send EUR/USD higher. In our main scenario, there should be little price action on the currency market as this should not move the market pricing of QE tapering much. US S&P500 future 1643 1643 1633 1633 1623 1623 1613 1613 1603 1603 Mon Thu Fri Mon Tue Wed US 10y gov yield 2.25 2.25 2.15 2.15 5 5 Mon Tue Thu Fri Mon Wed Global FX EUR/USD (LHS) USD/JPY (RHS) 1.348 98.4 1.338 96.9 1.328 95.4 1.318 93.9 Mon Tue Thu Fri Mon Wed Scandi FX Key figures and events 8.78 EUR/SEK (LHS) EUR/NOK (RHS) 7.75 8.73 7.71 8.68 7.67 8.63 7.63 8.58 Mon Tue Thu Fri Mon 7.59 Source: Bloomberg, Danske Bank Markets 2 19 June 2013
Today s market data: 19 June 2013 1.30 0.90 0 0.10 STOCKS DJSTOXX50 2662-0.3% Max 1.3 0.90 0.30 Max 0.7 0.3 OM XC20 521-0.2% Min -0.3 Min -0.9 OM XS30 1194 0.2% 0-0.10-0.1 0.4 0.4 OSE BX 481 0.7% -0.30 15 16 17 18 19 20 21 Grey line indicates closing of Danish markets 134.3 S&P500 Intraday, % DOW JONES NASDAQ 1 month -0.9% 1 month -5.7% S&P500 1652 Year-to-date 15.8% Year-to-date 3.3% NIKKEI () 13124-0.3% FX & COMMODITIES EUR 17:00 USD 134.04 133.95-9 134.0 134.0 JPY 128.05 127.63-0.42 1 day -2.35 5 Max ## GBP 85.81 85.66-0.14 1 month 5.75 1.43 133.7 Min ## 133.7 NOK 769.68 769.09-9 Year-t-date -315-5.04 0.3 SEK 867.26 864.24-2 133.4 133.4 DKK 745.98 746.02 4 CRB C R B, R aw PLN 426.25 426.49 0.24 JPY 95.53 95.29-0.24 1 day 0.18 1 month 5.13 GBP 156.21 156.37 0.16 1 month -1.16 Year-to-date 2 CHF 91.92 91.97 5 Year-t-date -8.58 YIELDS & INTEREST RATES USD-Yields Intraday Spread, P o licy R ate 3M bp 17:00, bp USD2Y USD10Y 2.22 USD 0.25 0.27 2 USD 10Y 2.20 2.18-1 0.28 Max 0.3 Max 2.2 EUR 0 0.21-29 USD 30Y 3.35 3.34-1 Min 0.2 Min 2.2 2.20 GBP 0 1 1 JPY 10Y 0.84 0.81-3 0.26 0 0 2.18 DKK SEK 0.20 0 0.26 1.23 6 23 (-1)* 17:00, bp NOK 0 1.75 25 DEM 10Y 4 8 4 0.24 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 0.10-0.30 134.3 133.1 2.16 0.70-0 Eurostoxx Intraday, % -0.90-0.9 09 10 11 12 13 14 15 16 17 18 Grey line indicates opening of US markets 0.7 - Close Close 15318 3482 Go ld, $ 1365.30 1M future 286.43 PLN 2.75 2.65-10 DKK 10Y 1.65 1.68 3 0.9% 0.9% 0.8% Oil, B rent, $ 106.07 Industrials 521.44-4.09-2.80-8.96 SEK 10Y 1.93 1.98 5 NOK 10Y 2.42 2.42 0 PLN 10Y 3.79 3.87 8 * As of closing previous trading day 0.61-10Y Yield Spread to Germany 2.72-0.76 76 0.41 0.11 0.85 2.30 USDJPYGBPFRF ITL DKKSEKNOKPLN - - - US Yield Curve 0.4 0.3 0.2 0.1 ## M ax 50 ## M ax ### ## M in -0.400-0.1 0.8 ## M in ### USD2Y USD5Y USD10Y D-t-D, bp (right axis) (left axis) 1 month ago (left axis) -0.2-0.3-0.4 1.8 1.6 1.4 1.2 0.6 0.4 0.2 German Yield Curve DEM2Y DEM5YR DEM10Y D-t-D, bp (right axis) (left axis) 1 month ago (left axis) 4.0 3.5 C redit spread, it raxx s. 11* 1 day 1 month Non-finan. 30 0 11 200 180 160 Credit spreads USD 10Y * Ask price ** Ask price Swap Spread, bp** Europe (IG) 109 1 18 140 JPY 10Y 18 19 1 HiVol 161 1 22 120 500 100 400 Xover (N-IG) 445 2 64 80 (-1)* 17:00 300 60 200 EUR 10Y 0 40 20 100 DKK 10Y 27 26-1 Finan. Sr. 157 2 29 0 0 SEK 10Y 37 36-1 Jun Aug Sep Nov Dec Feb Mar May Jun Finan. Sub. 234 2 49 NOK 10Y 51 49-2 itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) 800 700 600 17:00 * As of closing previous trading day USD 17:00 3 19 June 2013
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