In the Scandi markets focus today will be on Swedish retail sales and trade balance data, see more on page 2.

Transcription

1 Investment Research General Market Conditions 28 April 24 Danske Daily Market movers today We get a quiet start to a very busy week. Only release of interest today is the US pending home sales for March, which normally leads existing home sales by one to two months. It will give more information about the current slowdown in US housing and how much rebound we may see following the bad weather period. We look for a small rise of.4% m/m. The rest of the week is packed with key events. In the US we have FOMC meeting (Wednesday), ISM manufacturing (Thursday) and non-farm payrolls (Friday). We generally see upside risks to both ISM and non-farm payrolls and for the Fed to taper another USDbn and nod to the latest improvement in data. The FOMC meeting is without press conference and new projections this time but Fed chairman Janet Yellen speaks on Thursday, the day after the meeting. In the euro-area the highlight of the week will be the first estimate for inflation in April (Wednesday), which is expected to increase to.8% y/y from the low print of.5% y/y in March. In the Scandi markets focus today will be on Swedish retail sales and trade balance data, see more on page 2. Selected market news The crisis in Ukraine dominated the media over the weekend as seven members from the inspection team under an Organisation for Security and Cooperation (OSCE) including inspectors from Germany, Poland, Denmark, Sweden and the Czech Republic were seized late Friday by pro-russian rebels. The US and the EU plan to introduce further sanctions against Russia as a response to the development in Ukraine. According to Obama administration officials, sanctions will target those in Russian President Vladimir Putin's inner circle and the industries they control, including defence. US equities declined Friday amid the development in Ukraine. An unexpected drop in Market service PMI from 55.3 in March to 54.2 in April also curbed investors risk appetite. This morning the negative market sentiment continues with most regional indices in Asia trading lower. Late Friday, Fitch upgraded Spain s long-term ratings to 'BBB+' from 'BBB' with a stable outlook. The revision reflects that risks to Spain's creditworthiness have decreased since the sovereign was downgraded to 'BBB' in June 22. Financing conditions have improved, the economic outlook is more certain and the risk of Spanish banks posing an additional burden on the sovereign has diminished, Fitch says in a press release. Japanese retail sales data released overnight rose % y/y following a sharp rise in retail sales in March of 6.3% m/m as consumers frontloaded their purchases ahead of the VAT hike that was implemented on April. 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 Selected readings from Danske Bank Weekly Focus: Goodbye to negative rates in Denmark Flash Comment: Russian economy gets shot again Senior Analyst Morten Helt mohel@danskebank.dk 7:3 day +/-,% S&P5 (close) S&P5 fut (chng from close) Nikkei Hang Seng : 7:3 +/-, bp US 2y gov US y gov itraxx Europe (IG) itraxx Xover (Non IG) /-, % EUR/USD USD/JPY EUR/CHF EUR/GBP EUR/SEK EUR/NOK USD Oil Brent, USD Gold, USD T Important disclosures and certifications are contained from page 5 of this report.

2 Scandi markets Sweden. This week we will have a string of Swedish data giving us a more complete picture of Q GDP growth. Today we expect a slight acceleration in March retail sales and an improvement in March trade balance. Figures on Tuesday, April confidence figures from NIER, are likely to be the most market relevant this time: in case there is a third consecutive monthly decline, the overall evidence seems to suggest that the recent levelling-off in some data actually reflects a peak rather than a pause in the ongoing recovery. That will surely put pressure on the Riksbank on top of the subdued inflation. On Friday manufacturing PMI is due for release. This figure has bounced between 52 and 56 for some time now. Again, this outcome is likely to have some market impact as a higher figure would indicate a new high for this recovery, while a lower figure would again suggest a peak. That said, we believe Swedish rates have become less sensitive to real data and are more sensitive to inflation developments, especially as Riksbank has clearly stated inflation is the prime priority. Fixed income markets We have a fairly light schedule this week in the EU government bond market with only Italy and France tapping in the market. Italy is selling 5Y and Y benchmarks. We expect to see a solid demand for the Italian bonds as there is plenty of the redemptions and coupons from Spain as well as the one-notch upgrade from Fitch on Spain from BBB to BBB+. Hence, the sentiment surrounding the periphery is expected to be positive and we expect that the market soon will test the 3%-level in both Spanish and Italian Y government bonds. The short-term risk factor to the test of the 3%-level will be the FOMC meeting as well as EUR inflation this week. The FOMC meeting should not derail the spread compression but we could see outright pressure on bond yields. Also the expected rebound in the US data to be released this week could put some upward pressure on rates. The EU inflation data are expected to rise due to the Easter effect and depending on the magnitude of the increase, this will dampen expectations for the following week's ECB meeting and put the EUR rates at risk of moving higher. Especially the 5Y area could be at risk as the market is priced for more ECB easing. Meanwhile, excess liquidity has moved below EURbn and this continues to exert some upward pressure on fixings and the very short-end of the curve. Overall risks seems skewed for higher core rates in the coming week. In Scandinavia, Norway is tapping in the 7Y segment on the curve - NGB 3,75% May 22. Norges Bank is selling some NOK 4bn and we expect strong demand at the auction. The bond is cheap versus both EU peers and the NOK swap curve. Finally, given the lack of level assets in Norway in the NOK, there is a strong push to the government bonds from Norwegian banks. US S&P5 future Thu Mon Tue Wed Fri Mon US y gov yield Thu Mon Tue Wed Fri Mon Global FX EUR/USD (LHS) USD/JPY (RHS) Thu Fri Tue Wed Thu Mon Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) Thu Fri Tue Wed Thu FX markets In the Scandi FX Market today s Swedish retail sales and trade balance figures might lend some temporary support to the krona. However, minutes from the March meeting in the Riksbank released last week confirmed that many members in the majority camp were close to voting for a cut given the low rate of inflation. We still expect that the Riksbank will cut at the July meeting. Currently, the market is pricing 9bp for a cut at the July meeting and thus further EUR/SEK upside is likely to unfold in the coming weeks. Our 2 28 April 24

3 short-term financial model for EUR/SEK has currently a fair-value of 9.93 and a test of the strong technical resistance level at cannot be ruled out. With little data in the calendar to focus on today, the situation in Ukraine is likely to attract some attention. Pressure on RUB could continue this week following last Friday s sovereign rating downgrade to BBB- by S&P and despite the unexpected 5bp rate hike by Bank Rossii last Friday. The rising tensions have also spurred a new round of safehaven buying, supporting both JPY and CHF, and a negative sentiment could easily spread to the other markets if geopolitical woes escalate. Key figures and events Monday, April 28, 24 Period Danske Bank Consensus Previous 9:3 SEK Retail sales m/m y/y Mar.% 2.7%.4% 2.5% 9:3 SEK PPI m/m y/y Mar -.5%.% 9:3 SEK Trade balance SEK bn Mar : USD Pending home sales m/m y/y Mar.4%.6%....8% -.2% Source: Bloomberg, Danske Bank Markets 3 28 April 24

4 Today s market data: 28 April 24. DJSTOXX %. Max Max. OM XC % -.4 Min Min -.5 OM XS % OSE BX 566.6% DOW JONES Grey line indicates closing of Danish markets NASDAQ 476 Grey line indicates opening of US markets month.3% month.5% S&P Year-to-date.8% Year-to-date.4% NIKKEI (7:3) % JPY day Max ## 38.4 GBP month 7.42 Min ## NOK Year-t-date SEK DKK PLN USD 7: 7:3 +/- JPY day -.5 month.7 GBP month 5.48 Year-to-date.8 CHF Year-t-date 3.52 * The chart plot s 7:3-23: Fri and 23: Sun t o 7:3 Mon USD-Yields Intraday Spread,.45 USD2Y USDY P o licy R ate 3M bp 7: 7:3 +/-, bp 2.69 USD USD Y Max.5 Max 2.7 EUR USD 3Y Min.4 Min GBP JPY Y DKK S&P5 Intraday, % EUR/USD Intraday SEK STOCKS Eurostoxx Intraday, % FX & COMMODITIES 38.6 EUR 7: 7:3 +/- USD : YIELDS & INTEREST RATES.75 +/- +/- Oil, B rent, $ +/-, bp NOK DEM Y PLN DKK Y SEK Y USD2Y (lhs) USDY (rhs) NOK Y PLN Y * The chart plot s 7:3-23: Fri and 23: Sun t o 7:3 Mon * As of closing previous trading day :3 7:3(-)* Close Close Go ld, $ CRB M future : -.8% -.8% -.8% C R B, R aw Industrials Y Yield Spread to Germany USDJPYGBPFRF ITL DKKSEKNOKPLN US Yield Curve ## M ax.82 ## M ax ###.3.8 ## M in..2.6 ## M in ### USD2Y USD5Y USDY D-t-D +/-, bp (right axis) 7:3 (left axis) month ago (left axis) German Yield Curve DEM2Y DEM5YR DEMY D-t-D +/-, bp (right axis) 7:3 (left axis) month ago (left axis) C redit spread, it raxx s. * Credit spreads Swap Spread, bp** 7: 7:3 +/- 7:3 day month USD Y Europe (IG) 74-4 JPY Y HiVol 95-6 Xover (N-IG) 29-7:3(-)* 7: +/- EUR Y DKK Y Finan. Sr SEK Y Finan. Sub. 3-3 NOK Y Non-finan. itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) * As of closing previous trading day * Ask price ** Ask price 4 28 April 24

5 Disclosure This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ( Danske Bank ). Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts rules of ethics and the recommendations of the Danish Securities Dealers Association. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of highquality research based on research objectivity and independence. These procedures are documented in Danske Bank s research policies. Employees within Danske Bank s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Financial models and/or methodology used in this research report Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be obtained from the authors upon request. Risk warning Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis of relevant assumptions, are stated throughout the text. Expected updates Danske Daily is updated on a daily basis. First date of publication Please see the front page of this research report for the first date of publication. Price-related data is calculated using the closing price from the day before publication April 24

6 General disclaimer This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such financial instruments) ( Relevant Financial Instruments ). The research report has been prepared independently and solely on the basis of publicly available information that Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report. The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These opinions are subject to change, and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in this research report. This research report is not intended for retail customers in the United Kingdom or the United States. This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank s prior written consent. Disclaimer related to distribution in the United States This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank, pursuant to SEC Rule 5a-6 and related interpretations issued by the U.S. Securities and Exchange Commission. The research report is intended for distribution in the United States solely to "U.S. institutional investors" as defined in SEC Rule 5a-6. Danske Markets Inc. accepts responsibility for this research report in connection with distribution in the United States solely to U.S. institutional investors. Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are not registered or qualified as research analysts with the NYSE or FINRA, but satisfy the applicable requirements of a non-u.s. jurisdiction. Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in non- U.S. financial instruments may entail certain risks. Financial instruments of non-u.s. issuers may not be registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange Commission April 24