Investment Research General Market Conditions 12 February 2013 Danske Daily Key news Currency wars on top of the political agenda ahead of G20 meeting. Ireland s outlook upgraded to stable by S&P. US equities fell marginally while Japanese investors returned to the market with renewed optimism: Nikkei is up 2.3% this morning. Markets Overnight During the past 12 hours comments on currency wars have dominated the news flow and the topic is likely to remain on top of the political agenda ahead of the G20 meeting in Moscow on Friday. According to an article on FT.com, France forced the concerns about the strength of the euro on the agenda of the EU finance ministers meeting in Brussels yesterday. However, while France seems to be worried about the lack of ability to counter the aggressive monetary policy performed by other major central banks, thereby countering a stronger euro, Germany has another opinion. Bundesbank president and ECB member, Jens Weidmann, yesterday said that the euro is not overvalued and warned eurozone politicians to stay away from talking down the euro as this would lead to higher inflation in the end. Also US Under Secretary of the Treasury, Lael Brainard, commented on currency movements and said that we support the effort to reinvigorate growth and to end deflation in Japan. However, she also underlined that the G20 must not let countries manipulate their exchange rate. Last night, Fed s Yellen in a speech defended the Fed s monetary policy and underlined that the Fed has the option to keep rates low even after reaching the targets for inflation and unemployment. FOMC s objectives for unemployment and inflation are thresholds for possible action, not triggers that will necessarily prompt an immediate increase in the FOMC's target rate. When one of these thresholds is crossed, action is possible but not assured. Ireland s outlook was upgraded to stable from negative by S&P while the BBB+ rating was affirmed, the rating agency announced last night. The upgrade comes after the Irish government last week struck a deal with the ECB to replace EUR25bn of the shortterm debt with longer-term securities that will carry lower interest rates. Market movers today: UK CPI US NFIB small business optimism Market overview Note: * The itraxx Europe Index show 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. Source: Bloomberg 1 day,% S&P500 (close) 1517.0-6 S&P500 fut (chng from close) 1509.7-2 Nikkei 1140 2.22 Hang Seng 23215.2 0.16 17:00, bp US 2y gov 5 5 US 10y gov 1.95 1.96 itraxx Europe (IG) 116 117 itraxx Xover (Non IG) 456 456, % EUR/USD 1.342 1.338-8 USD/JPY 93.430 93.970 8 EUR/CHF 3 3 3 EUR/GBP 56 55-0.18 EUR/SEK 8.572 8.570-1 EUR/NOK 7.38 7.37-0.12 USD Oil Brent, USD 118.3 118.1-0.13 Gold, USD 165 1646.5-4 US equity markets ended the day marginally lower than Friday when S&P500 closed at its most expensive valuation since July 2011. S&P500 fell 0.1% while Dow Jones ended the day % lower. In Asia, Japanese investors returned to the market with renewed optimism and Nikkei is up 2.3% this morning after Brainard endorsed Japan s monetary policy. In the FX Market, Weidmann s comments gave some support to the euro, while the comments from Brainard were interpreted as a green light to sell yen, which fell against both USD and EUR. USD/JPY reached a high of 94.45 and is currently seen trading around the 93.95 level while EUR/JPY briefly broke above 126.50. Senior Analyst Morten Helt +45 45 12 85 18 mohel@danskebank.dk Important disclosures and certifications are contained from page 4 of this report.
Global Daily Focus today. After yesterday s euro group meeting EU finance ministers will today gather at 09:00 CET. EU finance ministers will probably try to agree on some sort of consensus ahead of the G20-meeting on Friday but as usual we are unlikely to see a market impact from the less important Ecofin-meeting. ECB president Mario Draghi is in Spain today where he will meet with Spain s Prime Minister Mariano Rajoy. Draghi is scheduled to host a press conference at 15:30 CET. In the US there are a couple of speeches from FOMC members with Esther George s speech particularly interesting because she has just become a voting member of the FOMC. Later tonight President Barack Obama will deliver his State of the Union address in the House of Representatives. Today s data calendar is very light with the most interesting releases CPI in the UK (10:30 CET) and NFIB small business sentiment in the US (16:00 CET). In Asia several markets, including China and Hong Kong, are still closed due to the Chinese Lunar New Year holiday. Fixed income markets. In euro government bond space Italy underperforms a bit against core ahead of the elections. Ireland last night got some good news as S&P revised up Ireland s outlook to stable from negative. The response comes in reaction to last week s promissory note deal and is just another sign of things evolving in the right direction for Ireland. There is a busy schedule today, mostly bills being sold (in Spain, Italy and Belgium). The Netherlands is tapping an estimated EUR3bn of its 5% 2018. In euro swap space there continues to be good interest in positioning for curve steepening especially in the long end of the curve. We believe this move could have further to go as positioning is probably not stretched yet. FX markets. With currency wars on top of the political agenda ahead of the G20 meeting on Friday, front-end volatility is likely to stay high. However, the risk of a temporary JPY sell-off ahead of the G20 meeting is reduced considerably after Brainard yesterday said that we support the effort to reinvigorate growth and to end deflation in Japan. Hence, investors looking for buying opportunities in USD/JPY ahead of the G20 meeting might be disappointed. Japan is currently doing something that is not very different from what the US has done previously, so it is very unlikely that the US will criticise Japan s current policy and we still look for Bank of Japan to continue with very aggressive monetary easing going forward. US NFIB small business optimism 110 6 2.5 In d e x In d e x 6 0.0 105 5 7.5 5 5.0 100 5 2.5 5 0.0 95 4 7.5 4 5.0 90 C o m p o s it e IS M > > 4 2.5 85 4 0.0 < < N F IB s m a ll b u s in e s s in d e x 3 7.5 80 3 5.0 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: Reuters EcoWin US S&P500 future 1511 1511 1501 1501 1491 1491 Fri Mon Tue Thu Fri Tue US 10y gov yield 7 7 1.87 1.87 Fri Mon Tue Thu Fri Tue Global FX EUR/USD (LHS) USD/JPY (RHS) Scandi Daily No key data releases in Scandinavia today. 1.373 1.353 94.2 93.4 92.6 Key figures and events 1.333 91.8 Fri Mon Wed Thu Sun Tue Tuesday, February 12, 2013 Period Danske Bank Consensus Previous 9:00 EUR ECOFIN meeting 9:15 CHF CPI m/m y/y Jan -0.3% -0.3% -% -% 10:30 GBP PPI - Input m/m y/y Jan -% 0.3% 10:30 GBP PPI - Output m/m y/y Jan 0.1% 1.9% -0.1% 2.2% 10:30 GBP CPI m/m y/y Jan % 2.7% % 2.7% 11:00 CHF SNB president Thomas Jordan speaks in Geneva 11:15 EUR ECB announces allotment in 7-day (MRO) 11:15 EUR ECB announces allotment in 1-month (LTRO) 16:00 USD NFIB small business optimism Index 88.0 17:30 USD Fed's George (voter, hawk) speaks 19:30 USD Fed's Lockhart (non-voter, hawk) speaks 20:00 USD Budget statement USD bn Jan Source: Bloomberg, Danske Bank Markets Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) 8.65 8.61 8.57 8.53 Fri Mon Wed Thu Mon 7.48 7.45 7.42 7.39 7.36 2 12 February 2013
Today s market data: 12 February 2013 0 0.10-0 STOCKS DJSTOXX50 Max Max 0.7 OM XC20 520 0.10 Min 0 Min - 0 OM XS30 1171 0.3 OSE BX 468 0 15 16 17 18 19 20 21 Grey line indicates closing of Danish markets 134.3 S&P500 Intraday, % DOW JONES NASDAQ 1 month 3.1% 1 month -% S&P500 1517 2616 -% Year-to-date 6.4% Year-to-date 1.5% NIKKEI () 11401 -% FX & COMMODITIES EUR 17:00 JPY 125.38 125.75 0.37 1 day -5-3 134.0 Max ## 134.0 GBP 85.65 85.50-0.15 1 month -16.30 7.46 Min ## NOK 738.30 737.42-8 Year-t-date -28.85 6.99 133.7 0.3 133.7 SEK 857.15 857.04-0.11 DKK 746.16 746.19 3 CRB C R B, R aw PLN 416.15 415.44-0.71 JPY 93.43 93.97 4 1 day -0.36 1 month 1 GBP 156.69 156.52-0.17 1 month 4.05 Year-to-date 1.90 CHF 91.76 94 8 Year-t-date 5.70 YIELDS & INTEREST RATES Go ld, $ 1M future USD-Yields Intraday Spread, 7 P o licy R ate 3M bp 17:00, bp 1.99 USD2Y USD10Y USD 5 9 4 USD 10Y 1.95 1.96 1 6Max 0.3 Max EUR 0.75 3-52 USD 30Y 3.16 3.17 1 Min Min 1.9 GBP 0 1 1 JPY 10Y 0.77 0.75-1 5 4 0 0 1.95 DKK SEK 0.30 0 0.33 1.17 3 17 (-1)* 17:00, bp NOK 1.50 1.95 45 DEM 10Y 0 1 1 3 07 10 13 16 19 22 01 04 USD2Y (lhs) EUR/USD Intraday 133.4 07 10 13 16 19 22 01 04 USD10Y (rhs) 0-0 0 0 0 Eurostoxx Intraday, % -0-1 09 10 11 12 13 14 15 16 17 18 Grey line indicates opening of US markets 134.3 USD 134.20 133.83-0.37 133.4 1.93 Close Close 13971 1646.50 300.71 PLN 3.75 3.71-4 DKK 10Y 1.75 1.77 1 3192-6.6% -0.3% -0.9% -% -0.1% -0.1% Oil, B rent, $ 118.10 Industrials 542.36 SEK 10Y 1.99 0 1 NOK 10Y 2.62 2.62 0 PLN 10Y 4.00 4.04 4 * As of closing previous trading day 4.25 10.32 11.96 10Y Yield Spread to Germany 3.5 3.01 3.0 2.44 2.5 1.5 1 0.35 0 4 0.16 0.39 USDJPYGBPFRF ITL DKKSEKNOKPLN - -6-1.5 3.5 3.0 2.5 1.5 - -1.5 1.8 US Yield Curve ## M ax 1.770 ## M ax 1.300 ## M in 00 ## M in ### USD2Y USD5Y USD10Y D-t-D, bp (right axis) (left axis) 1 month ago (left axis) 1.8 German Yield Curve 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. 41 0-50 200 180 160 Credit spreads * Ask price ** Ask price Swap Spread, bp** 17:00 USD 17:00 USD 10Y 8 9 0 Europe (IG) 117 0 13 140 JPY 10Y 3 5 2 HiVol 177 2 20 120 500 100 400 Xover (N-IG) 456 7 29 80 (-1)* 17:00 300 60 200 EUR 10Y 24 24 1 40 20 100 DKK 10Y 26 26 0 Finan. Sr. 157 1 25 0 0 SEK 10Y 45 43-2 Feb Mar May Jun Aug Sep Nov Dec Feb Finan. Sub. 269 2 49 NOK 10Y 84 83-1 itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) 800 700 600 * As of closing previous trading day Source: Bloomberg 7:30(-1) og 17:00 refers to the previous (trade) day 3 12 February 2013
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