Investment Research General Market Conditions 30 April 2013 Danske Daily Key news Italian government scraps tax increases and signals less fiscal austerity. Japanese data weaker than expected but still suggest a recovery has started. Today s eurozone CPI should improve odds of ECB rate cut. Italian PM Letta to deliver his message of less fiscal austerity to Berlin. Markets overnight The market sentiment is still moderately positive on expectations that major central banks will continue to support the market. The gradual movement towards less fiscal austerity evident in the eurozone has so far been received relatively well in both the stock and the bond markets. In Italy Prime Minister Enrico Letta yesterday presented the new government s programme in the Italian parliament and it does appear to be a shift towards less fiscal austerity, see Financial Times. A planned increase in the sales tax in July and the June instalment of the unpopular property tax will be scrapped as demanded by Berlusconi s People of Freedom Party, albeit the final fate of the property tax is not yet clear. In addition there were promises of some increases in welfare spending. The scrapped tax rises alone are expected to cut tax revenues by EUR6bn. Letta did not specify alternative funding for these measures and did not indicate to what degree the government s target for the budget deficit has been changed. In Japan the data released overnight were weaker than expected but still suggest that the Japanese economy has started to recover. Industrial production in March seasonally adjusted increased 0.2% m/m (Cons: 0.4% m/m). This was the fourth month in a row with an increase in industrial production. Japan s JMMA/Markit manufacturing PMI in April also improved to 51.1 from 50.4 in March and in April reached its highest level since March 2012. The unemployment rate in March dropped to 4.1% from 4.3% and hence reached its lowest level since November 2008. The US stock market finished higher with S&P 500 closing up 0.8% and the Asian stock markets are also higher across the board despite data released in Asia this morning disappointing slightly. Nikkei and Hang Seng are up 0.1% and 0.8% this morning. Mainland China is closed for a public holiday today. In the US bond market 10-year US bond yields have increased by 2bp to 1.67% since market close on the back of the improved risk sentiment. In the European bond market yesterday s Italian auctions of 5-year and 10-year were very successful despite signs of less fiscal austerity in Italy. 10-year Italian government bond yields declined by 9bp to 3.91%. In the FX market the major crosses have been largely range trading since market close in Europe. EUR/USD is trading largely unchanged at 1.310 and USD/JPY has moved marginally lower to 97.94. Market movers today EUR: Italian PM Letta meets German PM Merkel in Berlin EUR: CPI for April ESP: Q1 GDP DEM: Unemployment USD: Consumer confidence and Chicago PMI 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 Senior Economist Flemming J. Nielsen +45 45 12 85 35 flemm@danskebank.dk 1 day +/-,% S&P500 (close) 1593.6 0.72 S&P500 fut (chng from close) 1587.6-4 Nikkei 13880.4-3 Hang Seng 22762.7 0.81 17:00 +/-, bp US 2y gov 0.21 0.21 US 10y gov 1.65 1.67 1.5 itraxx Europe (IG) 100 101 0.7 itraxx Xover (Non IG) 407 408 1.6 +/-, % EUR/USD 1.310 1.310-2 USD/JPY 98.080 97.940-0.14 EUR/CHF 1.23 1.23 2 EUR/GBP 0.845 0.845 1 EUR/SEK 8.573 8.584 0.13 EUR/NOK 7.63 7.62-0.17 USD Oil Brent, USD 103.7 103.6-7 Gold, USD 1473.0 1469.4-0.25 Important disclosures and certifications are contained from page 5 of this report.
Global Daily Focus today. In Italy the new government is expected to survive the last of the two confidence votes in the parliament early today. After the confidence vote Prime Minister Enrico Letta will travel to Berlin to meet with Chancellor Angela Merkel. The new Italian government s programme signalling less fiscal austerity will without doubt be the main topic on the agenda. Eurozone consumer prices for April scheduled for release today should improve the odds of a rate cut from ECB on Thursday. Preliminary CPI data released for Germany and Spain yesterday suggest that euro area inflation dropped markedly below 1.5% y/y in April. In Europe focus today will also be on the first Q1 GDP estimate for Spain and unemployment in Germany. In the US the main data releases are consumer confidence, Chicago PMI and Case Shiller house prices Euro area inflation declining fast 4.0 % y / y % y / y 3.5 3.0 2.5 2.0 1.5 1.0 0.5 E u r o la n d H IC P in f la t io n 0.0-0.5-1.0 00 02 04 06 08 10 12 Source: Reuters EcoWin 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0 Fixed income markets. It has been a very quiet start to the week, as the ECB and the FOMC meetings are awaited. In the periphery the sentiment generally remains very positive and the spread compression continues. Both Italian and Spanish 5-year yields touched new lows since 2010 yesterday. With no tier-1 releases out of Europe, the EUR rate markets are likely to trade sideways today. In the US session the Chicago PMI is interesting as a gauge of how much the recent slowdown in US manufacturing data has extended. However, we doubt that the market will pay much attention so close to the FOMC meeting unless there is a big surprise in the data. Norway is printing NOK4bn NGB 3.75% May 2021. With the spread still above 90bp versus the Jul-21 Bund and the currency having underperformed significantly recently, we see value and expect a wellreceived auction. The FX markets will probably be in a wait-and-see mode ahead of the ECB and FOMC meetings later this week. We note that EUR/USD continues to stay well supported: the cross was above 1.31 yesterday afternoon. The support to the euro reflects in our view 1) the clarification of the Italian political situation that has removed yet another tail-risk from the euro, 2) that this week's refi-rate cut has already been priced in the market, 3) that new non-standard measures will probably not include a substantial expansion of the ECB balance sheet and 4) that the latest batch of weak US numbers has delayed the Fed exit. However, today's euro inflation data might be a risk for the euro as it might support views that more rate cuts need to be priced into the European money market curve. Yesterday we saw in the Minutes that the Riksbank had voted unanimously for a more expansionary monetary policy at the April meeting but as focus continues to be on household debt expansion, our view is still that a Riksbank rate-cut is not imminent. We continue to see downside for EUR/SEK this week. Note that strong support in EUR/SEK is not seen before 8.4790, whereas strong resistance is found at 8.6535. Scandi Daily Denmark. Some DKK-relevant news on the agenda today, since Danmarks Nationalbank will publish March s securities statistics and foreign portfolio investments. EUR/DKK was reasonably stable below the central parity in March, hence data will likely show that Danish assets kept its popular status among foreign investors in March. Also, data on registered unemployment in March are due for release today. It will likely show that unemployment was unchanged in March. US S&P500 future 1587 1587 1577 1577 1567 1567 1557 1557 1547 1547 1537 1537 Fri Mon Tue Thu Fri Tue US 10y gov yield 1.79 1.79 1.69 1.69 1.59 1.59 Fri Mon Tue Thu Fri Tue Global FX EUR/USD (LHS) USD/JPY (RHS) 1.316 99.7 98.9 1.306 98.1 1.296 97.3 Fri Mon Wed Thu Fri Tue Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) 8.64 7.70 8.59 7.66 8.54 7.62 8.49 Fri Mon Wed Thu Sun 7.58 2 30 April 2013
Key figures and events Tuesday, April 30, 2013 Period Danske Bank Consensus Previous - OTH Earnings: UBS, Deutsche Bank, Banco Popular Espanol - ESP Budget balance (year to date) EUR bn Mar -23.56 8:00 DEM GfK consumer confidence Net. Bal. May 5.9 5.9 8:45 FRF Household consumption m/m y/y Mar -0.2% -2.9% 9:00 DKK Gross unemployment s.a. % Mar 6.0% 6.0% 9:00 DKK CB's securities statistics Mar 9:00 ESP GDP, first release q/q y/y 1st quarter -0.6% -0.8% -1.9% 9:55 DEM Unemployment rate % Apr 6.9% 6.9% 6.9% 10:00 NOK Unemployment (LFS) % Feb 3.5% 3.6% 10:00 NOK Retail sales, s.a. m/m y/y Mar 0.5% -0.6% 10:30 GBP Broad money M4 m/m y/y Mar % 0.5% 10:30 GBP Mortgage Approvals 1000 Mar 51.7 11:00 EUR CPI estimate m/m y/y Apr 1.6% 1.6% 1.7% 11:00 EUR Unemployment % Mar 12.1% 12.1% 1% 11:00 ITL HICP, preliminary m/m y/y Apr 2.3% 1.8% 14:30 CAD GDP m/m y/y Feb 0.2% % 14:30 USD Employment cost index q/q 1st quarter 0.5% 0.5% 15:00 USD S&P Case Shiller House prices Index Feb 146.14 15:45 USD Chicago PMI Index Apr 53.0 52.4 16:00 USD Consumer confidence Index Apr 6 59.7 Source: Bloomberg, Danske Bank Markets 3 30 April 2013
Today s market data: 30 April 2013 0.90 0.50 0.10 STOCKS DJSTOXX50 Max 1.2 Max OM XC20 539 Min -0.3 0.50 0.30 Min 0.3 OM XS30 1198 0.4 0.4 OSE BX 478-0.30 15 16 17 18 19 20 21 Grey line indicates closing of Danish markets 131.2 S&P500 Intraday, % DOW JONES NASDAQ 1 month 1.6% 1 month 1.1% S&P500 1594 2728 0.4% Year-to-date 11.7% Year-to-date 5.8% NIKKEI () 13880 0.4% FX & COMMODITIES EUR 17:00 +/- USD 130.98 130.95-3 JPY 128.47 128.25-0.22 1 day -6.58-0.22 130.9 Max ## 130.9 GBP 84.54 84.55 1 1 month -129.40-6.43 Min ## NOK 762.80 761.50-1.30 Year-t-date -206.00-7.52 130.6 0.3 130.6 SEK 857.27 858.37 1.10 DKK 745.67 745.62-5 CRB C R B, R aw PLN 413.97 413.79-0.18 JPY 98.08 97.94-0.14 1 day 4.04 1 month 2.46 GBP 154.95 154.89-6 1 month -6.95 Year-to-date -0.98 CHF 93.70 93.74 4 Year-t-date -5.57 YIELDS & INTEREST RATES USD-Yields Intraday Spread, 0.25 P o licy R ate 3M bp 17:00 +/-, bp USD2Y USD10Y USD 0.25 0.27 2 USD 10Y 1.65 1.67 1 Max 0.3 Max 1.7 1.68 EUR 0.75 0.21-54 USD 30Y 2.85 2.88 3 0.23 Min 0.2 Min 1.6 GBP 0.50 0.50 0 JPY 10Y 0.59 0.60 1 0 0 DKK 0.30 0.25-5 1.66 0.21 SEK 0 1.23 23 (-1)* 17:00 +/-, bp 0.19 07 10 13 16 19 22 01 04 USD2Y (lhs) EUR/USD Intraday 130.3 07 10 13 16 19 22 01 04 USD10Y (rhs) 0.90 0.10-0.30 131.2 130.3 1.64 0.70-0.10 Eurostoxx Intraday, % 0 09 10 11 12 13 14 15 16 17 18 Grey line indicates opening of US markets 0.7-0.1 Close Close 14819 3307 Go ld, $ 1469.35 1M future 289.44 NOK 1.50 1.79 29 DEM 10Y 1.22 1.19-2 PLN 3.25 2.99-26 DKK 10Y 1.37 1.33-4 0.2% 0.3% -0.6% +/- +/- 0.7% 0.8% 0.7% Oil, B rent, $ 103.59 Industrials 528.45 SEK 10Y 1.57 1.58 1 NOK 10Y 6 6 0 PLN 10Y 3.37 3.31-5 * As of closing previous trading day 1.32-10.77-1.95 10Y Yield Spread to Germany 3.0 2.71 2.5 2.11 1.5 0.85 0.46 0.45 0.54 0.5 0.14 0.38 USDJPYGBPFRF ITL DKKSEKNOKPLN - -0.60 3.0 2.5 1.5 0.5-1.8 1.6 1.4 1.2 0.8 0.6 0.4 0.2 US Yield Curve ## M ax 1.110 0.2 ## M ax ### 0.8 ## M in -0.400 ## M in ### 0.8 0.6 0.4-0.2-0.4 USD2Y USD5Y USD10Y D-t-D +/-, bp (right axis) (left axis) 1 month ago (left axis) 1.8 1.6 1.4 1.2 German Yield Curve 0.1-0.1-0.3 0.6-0.7 0.4 0.2-0.9-1.1 DEM2Y DEM5YR DEM10Y D-t-D +/-, bp (right axis) (left axis) 1 month ago (left axis) C redit spread, it raxx s. 11* 1 day 1 month Non-finan. 23-1 -9 200 180 160 Credit spreads USD 10Y * Ask price ** Ask price Swap Spread, bp** Europe (IG) 101-5 -25 140 JPY 10Y 18 17 0 HiVol 157-5 -28 120 500 100 400 Xover (N-IG) 408-21 -79 80 (-1)* 17:00 +/- 300 60 200 EUR 10Y 0 40 20 100 DKK 10Y 28 27-2 Finan. Sr. 154-7 -41 0 0 SEK 10Y 28 28 0 May Jun Jul Sep Oct Dec Jan Mar Apr Finan. Sub. 247-9 -68 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 +/- +/- 4 30 April 2013
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