In the euro area the trade balance for June will give insight into whether the end of the recession was driven by growth abroad.
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- Cordelia Gilbert
- 5 years ago
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1 Investment Research General Market Conditions 16 August 2013 Danske Daily Market movers today In the euro area the trade balance for June will give insight into whether the end of the recession was driven by growth abroad. Market overview 07:30 1 day +/-,% Euro area releases final CPI for July, which is expected to be unrevised at 1.6%. Core inflation is expected at 1.1%, also in line with the flash estimate. ECB will announce the weekly repayment of the 3Y LTRO. The weekly LTRO repayment has been decreasing and last week s announcement was the second lowest so far. We expect to see a rebound in the US housing market from last month s soft readings, as both housing starts and building permits are expected to increase. The preliminary release of the University of Michigan consumer confidence should give us some insight into how US consumer sentiment developed over the month. We expect a little fall, whereas consensus is for a minor increase. If there is a setback, confidence will remain high as the reading in July was the highest since Selected market news Stock markets took a nosedive yesterday as the US market fell %. The strongest US jobless claims data since 2007 weighed on the market as it raised expectations of faster Fed tapering and pushed yields higher. Adding to the decline in risk appetite were disappointing forecasts from Cisco Systems and Walmart as well as a further rise in oil prices on geopolitical risks stemming from the turmoil in Egypt. The price of Brent oil yesterday rose to a five-month high at USD111 per barrel. Asian stock markets have been mixed. Nikkei is slightly lower while Chinese stocks showed decent gains, as two of the biggest stocks suddenly spiked higher late in the trading session. S&P500 (close) S&P500 fut (chng from close) Nikkei Hang Seng 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 17:00 07:30 +/-, bp US 2y gov US 10y 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 Other US data were mixed yesterday. US Philadelphia Fed survey fell slightly more than expected to 9.3 in August (consensus 15.0) from 19.8 in July, whereas the NAHB housing index rose from 56 in June to 59 in July, the highest level since Overall data continue to point to a decent recovery in H2, adding to expectations that Fed will start tapering at the next meeting on 18 September. The US 10-year treasury yield hit 2.80% yesterday, the highest level in two years. EUR/USD initially fell on the stronger US data but it spiked in the evening session to 1.335, back to the level where it started the week. Chief Analyst Allan von Mehren alvo@danskebank.dk Important disclosures and certifications are contained from page 4 of this report.
2 Scandi markets today No key events in the Scandi markets today. Fixed Income markets Core fixed income markets remain under pressure. The sell-off reflects a fundamental upward pressure on real rates due to improving global outlook, particularly for the US but also in Europe. Interestingly, peripheral markets managed to tighten versus German Bunds, which underscores that the market perception of the risks in southern Europe is declining. The sell-off in core markets probably also reflects poor positioning and investors demanding a higher liquidity premium to compensate for higher volatility in the longer end of the yield curves. Yesterday s US data releases keep the Fed on track for starting scaling down its asset purchases in September, but other than that there were few obvious drivers for the significant move higher in rates in the US and EUR swap markets. For us, the markets appear to have fully discounted September tapering indicating fewer upside risks. However, as market liquidity is still thin with large parts of Europe still on holiday, we do not stand ready to fade it. FX markets Yesterday we published updated FX Forecasts in FX Forecast Update: More GBP, USD and SEK strength in store. Note that we have left our 12M EUR/USD forecast unchanged (at 1.25) but have upped our near-term profile with the eurozone set to surprise positively in H2; we now expect EUR/USD to trade at 1.31 in three months (previously 1.28) and 1.28 (1.27) in six months. Hence, we stress that we do not expect to see strong structural and cyclical support to USD before mid The next couple of months the euro will be supported by better data out of the eurozone and the performance of peripheral bonds, which implies that the start of tapering is not enough to start a strong trend lower in EUR/USD for now. For that we need support from relative rates, which we do not expect before mid US S&P500 future US 10y gov yield Global FX EUR/USD (LHS) USD/JPY (RHS) In the light of the recovery in the UK we have pencilled in a stronger GBP on a three- to six-month horizon. Note, though, that GBP will still be left with the second most dovish G4 central bank after BoJ in Hence, GBP performance is not expected to continue in Today the FX market will focus on US housing data and the LTRO repayment announcement. The recent move higher in EONIA rates has supported the euro. Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) Key figures and events Source: Bloomberg, Danske Bank Markets 2 16 August 2013
3 Today s market data: 16 August S&P500 Intraday, % STOCKS DJSTOXX50 Max 0.3 Max 0.2 OM XC Min Min OM XS OSE BX Grey line indicates closing of Danish markets DOW JONES NASDAQ 1 month -0.9% 1 month 2.1% S&P % Year-to-date 16.5% Year-to-date 6.0% NIKKEI (07:30) % FX & COMMODITIES EUR 17:00 07:30 +/- USD : JPY day Max ## GBP month Min ## NOK Year-t-date SEK DKK CRB C R B, R aw PLN JPY day month 1.82 GBP month 3.97 Year-to-date 1 CHF Year-t-date -6 YIELDS & INTEREST RATES Go ld, $ 1M future USD-Yields Intraday Spread, P o licy R ate 3M bp 17:00 07:30 +/-, bp 0.37 USD2Y USD10Y USD USD 10Y Max 0.4 Max 2.8 EUR USD 30Y Min 0.3 Min 2.7 GBP JPY 10Y DKK SEK :30(-1)* 17:00 +/-, bp NOK DEM 10Y USD2Y (lhs) EUR/USD Intraday USD10Y (rhs) Eurostoxx Intraday, % Grey line indicates opening of US markets :30 Close Close PLN DKK 10Y % -1.4% -0.7% +/- +/- -% -1.7% -1.4% Oil, B rent, $ Industrials SEK 10Y NOK 10Y PLN 10Y * As of closing previous trading day Y Yield Spread to Germany USDJPYGBPFRF ITL DKKSEKNOKPLN US Yield Curve German Yield Curve ## M ax ## M ax ### 0.8 ## M in ## M in ### USD2Y USD5Y USD10Y DEM2Y DEM5YR DEM10Y D-t-D +/-, bp (right axis) 07:30 (left axis) 1 month ago (left axis) 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** :00 07:30 +/- 07:30 1 day 1 month USD 10Y Europe (IG) JPY 10Y HiVol Xover (N-IG) :30(-1)* 17:00 +/ EUR 10Y DKK 10Y Finan. Sr SEK 10Y Finan. Sub Aug Oct Nov Jan Feb Apr May Jul Aug NOK 10Y Non-finan itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) * Ask price ** Ask price * As of closing previous trading day 3 16 August 2013
4 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. 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 August 2013
5 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 15a-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 15a-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 August 2013
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