FX Crossroads Overbought sterling raises a frown

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1 Investment Research General Market Conditions 30 June 2010 FX Crossroads Overbought sterling raises a frown EUR/GBP well below short-term financial estimate Relative rates favour short NOK/SEK Whats going on? Source: Reuters Ecowin, Danske Markets Source: Reuters Ecowin The short view... 2 China takes baby step in Yuan revaluation. EUR/CHF declines to record lows as SNB loosens grip and euro sells off. Pound strengthens massively against euro too much, according to our model estimates. SEK holds up despite rise in risk aversion ahead of Riksbank meeting. Overbought sterling raises a frown... 3 EUR/GBP has fallen sharply too sharply, according to our short-term financial model, which suggests that sterling is close to 8% overbought in the short term. To investors with GBP income, we recommend to hedge up to six months at current levels. For strategic players, an idea could be to buy EUR/GBP spot on dips or to enter a zero-cost option strategy (see details on page 4). NOK/SEK: Business as usual at the Riksbank, but soft at Norges Bank... 5 The Riksbank is widely expected to announce a rate hike tomorrow and strike a hawkish tone. We still favour long SEK positions, but prefer to take the position in the FX market to take advantage of the skew. Norges Bank, on the other hand, revised its interest rate path significantly lower last week. We see further short-term downside risk for NOK/SEK. However, medium to long-term we still see value in NOK. G10 volatility: Summer tranquility?... 7 While general market liquidity is likely to be on the decline in July, we have previously found evidence of a fall in implied and realised volatility during the summer. Seasonality effects should therefore not add to current market nervousness. Rather, we have previously found evidence of a pick-up in volatility as traders return from the summer lull. The results suggest that entering long volatility strategies is not profitable prior to the summer trough, whereas such positions benefit from the autumn spike in implied volatility. FX forecasts... 8 Current trading recommendations Buy 1M EUR/GBP call and sell OT (zero cost). Buy 1M 1* EUR/SEK 9.50 Put and Sell 1M 2*EUR/SEK 9.70 Call with a KO at 9.54 ahead of the Riksbank meeting. See FX Top Trades 2010 G10: 2W changes against EUR CHF JPY GBP SEK USD NZD NOK AUD CAD -4% -2% 0% 2% 4% 6% FX trading recommendations... 9 Central bank and interest rate outlook Macro outlook and FX correlations Senior Analyst John Hydeskov johy@danskebank.dk

2 The short view Market pricing a loss of momentum in the economic recovery already? After a decent rally during early June, risky assets have come under renewed pressure the S&P500 Index closed at the lowest level since November last year. Disappointing US consumer confidence data and fears about a potential liquidity shortage among the weaker European banks, as the EUR442bn 12-month long-term refinancing operation (LTRO) conducted in June 2009 expires this week, have weighed on risk sentiment. The currency implications have been significant, with the safe havens of CHF and JPY gaining against all other G10 currencies (with EUR/CHF and EUR/JPY reaching new lows). The fact that the Scandies have been able to strengthen further against the euro despite risky assets selling off illustrates the intensified pressure on the euro as also witnessed in the government bond market, where PIIGS sovereign spreads are widening once again. On Friday (2 July), we will see whether a strong non-farm payroll report can turn sentiment around. When a cork is kept below the water too long: The big outperformer in recent weeks has been the Swiss franc, which is continuing to set new all-time highs against the euro. After the Swiss National Bank (SNB) signalled at its 17 June monetary policy meeting that the market would now again be allowed to set the price of CHF (should no new deflationary shock hit the Swiss economy), EUR/CHF has moved nearly 5% lower with a current low at Safe-haven flows into CHF, which is being used as a hedge against a EUR collapse, and the unwinding of CHF loans put in place prior to the 2008 financial crisis, are likely to have been the main drivers. And while speculative CHF long positioning is likely to be quite stretched, the majority of the move lower in EUR/CHF appears fundamentally justified, considering that accelerated intervention by the SNB during April and May kept EUR/CHF artificially high (FX reserves rose by CHF144bn in 2010 more than three times the increase in the whole of 2009). Given the signal shift from the SNB and that we see a significant risk of further CHF loan unwinding, we have decided to revise our EUR/CHF forecast lower. We now expect EUR/CHF at 1.30 in 3M (1.37), 1.28 in 6M (1.37) and 1.35 in 12M (1.41) old forecasts in brackets. However, profit-taking could easily lift EUR/CHF substantially in the coming days, perhaps back to levels above Downwards pressure in EUR/DKK eases: Unwinding of CHF funding and the accompanying CHF/DKK buying, combined with the sour mood in financial markets and the lack of yield pick-up in DKK, has lifted EUR/DKK from very low levels. Both domestic and foreign investors have reduced short EUR/DKK positions in recent days but in our view there is room for even more short covering. Going forward, a weaker DKK cannot be excluded, but we would be surprised if the Danish Central Bank does not stem the slide at some point, if it continues at this pace. We still think that the bank aims to keep EUR/DKK on the strong side of the central parity, Back to discussing the Scandies as safe havens: The renewed decoupling between EUR/SEK and EUR/NOK and general risk sentiment is likely to fuel renewed debate about Scandies as fiscal safe havens. We still doubt that illiquid currencies backed by economies with a high beta to the global business cycle can qualify as true safe havens. Rather, we attribute the lack of upward momentum in EUR/SEK to pricing ahead of Thursday s Riksbank meeting (where Sweden is expected to join the exclusive club of rate hikers) and general EUR pressure in the market. For EUR/NOK, stability should likely be seen in relation to the resilient energy prices and the fact that the market had been selling NOK ahead of the 23 June Norges Bank meeting. In the short term we see further potential for the Scandies not least SEK, where aggressive pricing of the Riksbank is not expected to be able to hold back the currency from appreciating against the euro June 2010

3 Overbought sterling raises a frown When is enough enough? Sterling has gained almost 5% against the euro over the past month and the UK currency seems almost unstoppable, with only limited technical support before the psychologically important 0.80 level. The technical trend is clearly negative. What is going on and is it possible that EUR/GBP will begin a new 0.70s era, a scenario that most thought unattainable when sterling was close to parity against the euro in late 2008? Sterling has recently gained support from the Conservative/Lib Dem crisis budget in which the government presented harsh austerity measures, but managed to persuade investors that the spending cuts will sustain the UK s top credit rating without risking economic growth. The VAT rise from 17.5% to 20.0% from the beginning of 2011 has already been approved by the House of Commons. The budget was welcomed by credit rating agencies Moody s and Fitch confirming the UK s AAA-rating; S&P, which has the UK on negative outlook, took a more cautious approach, saying that the spending cuts had to be implemented first. We are in the latter camp and remain sceptical until we have seen that the government s balance is being improved, see An Unavoidable UK Crisis. Key points EUR/GBP has fallen sharply too sharply, according to our shortterm financial model which suggests that sterling is close to 8% overbought in the short term. To investors with GBP income, we recommend to hedge up to six months at current levels. For strategic players, an idea could be to buy EUR/GBP spot on dips or to enter a zero-cost option strategy (see details on next page) Bank of England (BoE) MPC member Andrew Sentance s one-man crusade to raise UK rates has also sent sterling higher. His vote for a 25bp hike at the last MPC meeting raised speculation that the BoE was moving away from quantitative easing (QE), but we are not so sure. One swallow does not make a summer and the hawkish Sentance is quite isolated in the committee and should not be seen as representative of the MPC. Even though the BoE has done quite lot in terms of QE, a new round cannot be excluded if the need for additional monetary stimulus reemerges, as rates cannot be lowered further. Our bet is that the BoE will stay put until mid-2011, i.e. not try to push UK rates higher. Gilt buying has also boosted sterling. UK government bonds outperformed German debt in the second quarter, giving investors a 4.24% gain, 23bp better than their European counterparts. So while England could not beat Germany at football, at least they won in the debt markets. Chart 1: EUR/GBP vs. relative rates no clear relationship Source: Reuters Ecowin Chart 2: Closer relationship with GBP and USD than earlier in the year Chart 3: EUR/GBP short-term financial model spot well below model estimate Source: Reuters Ecowin Note: Model based on 2Y swap spread, relative trends in financials, UK financials, S&P500 Index and VIX Source: Reuters Ecowin, Danske Markets Senior Analyst John Hydeskov johy@danskebank.dk 3 30 June 2010

4 Be careful with sterling from now on There are several reasons to be cautious with sterling going forward. Even though a further dollar appreciation against euro will imply downward pressure on EUR/GBP, we find tentative evidence that it is oversold (RSI 14 < 30) and has fallen too much on a cheap background. The decline in EUR/GBP is way out of sync with our short-term financial model. Relative rates (FRA-4 spread) do not imply lower levels in EUR/GBP, VIX has been volatile and equity markets have fallen. UK financials have performed better than European financials in the past two months but are in fact lower on the year. The difference between the spot level and our short-term fair value estimate (0.88) now exceeds two standard deviations, which is quite rare and usually point towards a correction, as was the case in December 2008, March 2009 and October 2009, for example. Sterling is not and will never be a safe-haven currency. As we see financial markets becoming more tense, we consider it unlikely that investors buy sterling in an odd flight-to-safety. The banking sector has not fully healed and we fear that UK banks could face difficulties in stress tests. Risk/reward has bottomed - time to lock in GBP income. Strategic players can consider a zero-cost option strategy. We recommend taking advantage of the low EUR/GBP spot level and hedging GBP income for up to six months. The level is attractive (25-month high) and the skew has decreased sharply in the past week (the 6M risk reversal has fallen to 0.49, a 1-year low). As the risk/reward for lower levels has worsened in recent weeks, we see little potential in chasing much better levels. For longer maturities, we recommend to build in some potential for further appreciation of sterling, which remains undervalued from a PPP perspective. We look for a higher EUR/GBP and expect the strong resistance levels at (6 November 2008 low) and (4 November 2008 low) to hold. Accordingly, we like buying upside options, which benefit from the slightly negative skew. These could be financed by selling a downside one-touch, thereby achieving a zero-cost structure with known downside. Consider buying a 1M EUR/GBP call at 0.75% EUR. With a EUR notional of 1, , the cost (7500 EUR) could be financed by selling a 1M one-touch with a notional of EUR (33.3% upfront premium received). Note: indicative prices, spot ref June 2010

5 NOK/SEK: Business as usual at the Riksbank, but soft at Norges Bank Riksbank to deliver despite European debt turmoil In the last issue of FX Crossroads, we previewed the upcoming Riksbank meeting, so we will not repeat the arguments as to why we together with the vast majority of other analysts look for a rate hike tomorrow. In our view, we have seen no news over the past two weeks that is likely to change the position of the Riksbank. In particular, we have seen absolutely no indication that the Riksbank has changed its mind regarding the effect on the Swedish economy of the European debt crisis. Even though a rate hike should be of little surprise to the market, we believe it will be able to push EUR/SEK firmly below The Riksbank is likely to back up its first rate hike in this cycle with a hawkish attitude, and it is also notable that Sweden would be the first non-commodity G10 country to start normalising rates. The deviation between the Riksbank repo rate path and market pricing is currently wider than ever at the two-year point. The RIBA is currently pricing a repo rate near 1% at the turn of the year and 1.5% next summer, but the huge difference is further out. In Q2 12 the market is pricing a repo rate of just above 2%, whereas the Riksbank predicts a repo rate well over 3%. And the difference increases on an even longer timeframe. Pricing ahead of the Riksbank next week Key points The Riksbank is widely expected to announce a rate hike tomorrow and strike a hawkish tone. We still favour long SEK positions, but prefer to take the position in the FX market to take advantage of the skew. Norges Bank, on the other hand, revised its interest rate path significantly lower last week. We see further short-term downside risk for NOK/SEK. However, medium to long-term we still see value in NOK. Relative rates support SEK (2y swap spreads vs. Sweden) << Euroland << Sweden Two weeks ago, in our Riksbank preview, we recommended buying a 1M 1*EUR/SEK 9.50 put and selling a 1M2*EUR/SEK 9.70 call with a knock-out at The call options have now been knocked out and we are left with a EUR/SEK 9.50 put that will expire on 16 July. The option has a value of 0.8%. We recommend keeping the put option to expiry or at least over the rate announcement. For investors who wish to enter long SEK positions ahead of the meeting, we would recommend using risk reversals to take advantage of the option skew, which is heavily biased for upside in EUR/SEK. See more on option pricing in FX Market Update, published yesterday. We look for a hawkish Riksbank, where the risk is tilted toward an upward revision to the interest rate path. However, it was a very different message that we received from Norges Bank last week. The Norwegian central bank delivered a rather soft report and revised its policy path significantly lower. However, note that Norges Bank has already hiked three times (and is back to 2%), whereas the Riksbank is still on an emergency level of 0.25% Norway >> << USA December February March April May June Source: Reuters Ecowin Chief Analyst Arne Lohmann Rasmussen arr@danskebank.dk June 2010

6 This is an important input to bear in mind when drawing any conclusions about the outcome from the Riksbank, given the altered interest rate forecast by Norges Bank. Soft message from Norges Bank Norges Bank, as expected, left its policy rate unchanged at 2% at the monetary policy meeting on 23 June. In the accompanying Monetary Policy Report, Norges Bank made a significant downward revision to its interest rate path of up to 70 basis points and underlined that there are no imminent rate hikes in the pipeline. According to the interest rate path, Norges Bank pencilled in a 50/50 chance of a rate hike at the December 2010 policy meeting. Basically, Norges Bank is on hold for the next six months. Contrary to what we expect from the Riksbank, there is little doubt that Norges Bank is quite worried about the European debt crisis. The central bank said: The outlook for Europe is uncertain. Many countries are compelled to implement substantial fiscal tightening. This would dampen economic activity and may have an impact on other countries, both within and outside Europe. Substantial downward revision to Norges Bank interest rate path Change r.h. Old interest rate path New interest rate path Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Source: Norges Bank But, all in all, even though the interest rate path was revised significantly lower, Norges Bank is still in the process of normalising rates. Norges Bank still sees itself belonging to the exclusive club of central banks that are in the process of hiking rates membership is just on hold for now. Short-term risk of lower NOK/SEK Relative rates favour short NOK/SEK If the Riksbank delivers the rate hike and sounds relative hawkish, it will once again underline the current difference between Swedish and Norwegian monetary policy. Hence, we could see further downside in NOK/SEK over the coming days. However, according to the technical analysts, there is strong resistance at the 25 March 2010 low. That said, we continue to see medium to long-term value in NOK, as Norges Bank is nowhere close to actually cutting rates. In fact, given that Norges Bank is still expected to out-hike the ECB and Norwegian growth is still forecast to rise at a healthy rate, we believe that NOK will eventually start to recover again bp NOK/SEK >> << NOK-SEK 2y swap spread Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Source: Reuters Ecowin June 2010

7 G10 volatility: summer tranquility? Thin summer trading should not add to market volatility Over the past couple of weeks, nervousness seems to have taken hold of financial markets again, as disappointing economic data and continued European debt concerns have led market participants to question the state of the global recovery. This is also causing erratic movements on the FX market, leading to an increase in implied volatility. July has traditionally marked the beginning of thin summer trading, as the holiday season takes hold of the market. As trading volume drops, one could expect price fluctuations to increase and hence volatility to pick up. However, in a previous edition (FX Crossroads: Post-vacation blues), we argued that this is not the case. While liquidity does indeed have a tendency to dry up in July, we found that there was no historical evidence of a widening of daily trading ranges, nor did the market s pricing of expected volatility increase. Thus, looking purely at seasonal effects, there is little to suggest that summer trading should add to market nervousness. Seasonality points to post-vacation blues We examined the seasonality in implied and realised volatility by looking at the median implied volatility and daily spot range sampled every month, and arrived at the following results (the statistically significant effects are summarised in the margin tables): The clearest pattern over time is seen in USD/JPY. Implied volatility tends to be significantly above average in March, but we also find evidence of higher implied volatility in September. This may be related to structural issues, as March and September mark the fiscal year-end and half-year end in Japan. On average, implied volatility has fallen in all currency pairs but two during July (see Table 1). While the effect is not statistically significant, we found significant evidence of higher implied volatility in September and October. This suggests that implied volatility picks up as traders return from the summer lull. The autumn increase in implied volatility is most evident in EUR/USD and NZD/USD. The realised daily trading range tends to be significantly tighter during July in EUR/SEK, EUR/NOK and EUR/CHF. However, on average the median realised daily trading range has declined during July in all currency pairs except USD/CAD. Thus, implied and realised volatility appear to move hand in hand. Table 1. Average monthly change in implied volatility (percentage points) Month EURUSD USDJPY EURCHF EURGBP EURSEK EURNOK AUDUSD NZDUSD USDCAD Jan Feb Mar Apr Maj Jun Jul Aug Sep Okt Nov Dec Note: the table shows the average monthly change in the median of daily observations from March 1999 to June Key points While general market liquidity is likely to be on the decline in July, we have previously found evidence of a fall in implied and realised volatility during the summer. Seasonality effects should therefore not add to current market nervousness. Rather, we have previously found evidence of a pick-up in volatility as traders return from the summer lull. The results suggest that entering long volatility strategies is not profitable prior to the summer trough, whereas such positions benefit from the autumn spike in implied volatility. Seasonality in implied volatility (1M) EUR/ USD/ EUR/ EUR/ EUR/ EUR/ AUD/ NZD/ USD/ USD JPY CHF GBP SEK NOK USD USD CAD Jan () () () Feb Mar Apr May Jun Jul Aug Sep () () Oct () () () () () () Nov () Dec. Note: Results in brackets are less robust to choice of estimation window. Seasonality in realised daily range EUR/ USD/ EUR/ EUR/ EUR/ EUR/ AUD/ NZD/ USD/ USD JPY CHF GBP SEK NOK USD USD CAD Jan () Feb Mar () () Apr May Jun Jul Aug () Sep () () Oct () () () () () () Nov Dec (). Note: Results in brackets are less robust to choice of estimation window. Senior Analyst Sverre Holbek holb@danskebank.dk 7 30 June 2010

8 FX forecasts Danske FX forecasts Forecast Forecast vs forward outright, % Spot +1m +3m +6m +12m +1m +3m +6m +12m Exchange rates vs EUR USD JPY GBP CHF DKK NOK SEK Exchange rates vs USD JPY GBP CHF DKK NOK SEK CAD AUD NZD June 2010

9 FX trading recommendations Danske FX Trading Recommendations Open Start date Level Now Target Stop P/L (incl carry) Comment EUR/SEK 1M optio 16/06/ % 0.69% % Long 9.50 put, short 2*9.70 KO call EUR/GBP 1M optio 29/06/ % -0.01% -0.01% Long call, short OT Recently closed Start date Level Exit date Level P/L (incl carry) Buy USD/JPY 02/06/ /06/ % Sell USD/CAD 01/06/ /06/ % Buy AUD/USD 28/05/ /06/ % P/L % Open 0.69% Closed -4.91% # of trades since # of trades in average net gain 0.30% - average net gain -0.30% - batting average batting average 0.36 FX Top Trades 2010 Spot strategies** Start date Spot entry Spot now Target Stop Carry* Total P/L Sell USD/MXN 16/12/ % Buy Asian Basket 16/12/ % Option strategies Start date Days to exp. Spot entry Spot now Entry P/L Current*** Total P/L Sell EURUSD 1.39/1.50 strangle 16/12/ % % -7.28% Closed / expired trades Start date Spot entry Spot exit Entry P/L Carry* FX Total P/L EURCHF 4M/9M 1.51 straddle calendar spread 16/12/ % % Sell EUR/NOK 16/12/ % Sell NZD/BRL 16/12/ % Buy PLN/CZK 16/12/ % Buy EURSEK put, sell callx RK16/12/ % % Buy KRW/JPY 16/12/ % Sell EUR/GBP 16/12/ % Spot strategies, average P/L 3.58% Open 0.56% Closed 4.79% Option strategies, average P/L 1.97% Open -7.28% Closed 6.59% Top trades, average P/L 3.10% Open -2.06% Closed 5.31% * Carry on spot strategies calulated as 3M Libor spread on daily basis ** Asian basket consist of equally weighted long position consisting of CNY, SGD, TWD and KRW against USD *** P/L of open option strategies marked to market using Bloomberg pricing models providing indicative mid-prices 9 30 June 2010

10 Central bank outlook Prob., Prob., Next Danske forecasts Official policy rate Current Last move (bp) Cycle since next 1) 1Y 2) decision Next move 3M 6M 12M EUR Minimum bid rate 1.00% Apr 09 Ease 08 Oct Jul 10 H USD Federal funds rate 0.13% Dec 08 Ease 17 Sep Aug 10 Q JPY Overnight call rate 0.10% Dec 08 Ease 30 Oct Jul 10 H GBP Base rate 0.50% Mar 09 Ease 06 Dec Jul 10 H CHF 3-month Libor 0.25% Mar 09 Ease 08 Oct Sep 10 Q SEK Repo rate 0.25% Apr 09 Ease 14 Oct Jul 10 Q NOK Sight deposit rate 2.00% Oct 09 Tight 28 Oct Aug 10 Q CAD Overnight rate 0.50% Apr 09 Ease 04 Dec Jul 10 Q AUD Cash rate 4.50% Nov 09 Tight 06 Oct Jul 10 Q NZD Cash rate 2.75% Mar 09 Ease 27 Jul Jul 10 Q ) OIS derived percentage probability of a 25bp tightening or easing of monetary policy at next meeting. Positive (negative) number indicates rate hike (cut). 2) Number of basis points of rate hikes or cuts that are priced for the next 12 months. Positive number represents the markets implied pricing of rate hikes from each central bank. Derived from the OIS curve. Note: 1) OIS derived percentage probability of a 25bp tightening or easing of monetary policy at next meeting. Positive (negative) number indicates rate hike (cut). 2) Number of basis points of rate hikes or cuts that are priced for the next 12 months. Positive number represents the markets implied pricing of rate hikes from each central bank. Derived from the OIS curve. Interest rate outlook 2-year swap spread (bp) 10-year swap spread (bp) Current 3M 6M 12M Current 3M 6M 12M EUR/USD EUR/GBP EUR/JPY EUR/CHF EUR/SEK EUR/NOK EUR/DKK USD/JPY GBP/USD USD/CHF USD/SEK USD/NOK USD/DKK CHF/DKK NOK/SEK June 2010

11 Macro outlook and FX correlations Macro outlook GDP Inflation Current account GDP Inflation Unemployment Unemployment Current account USA Switzerland Euroland Denmark Japan Sweden UK Norway FX correlations EUR USD JPY GBP CHF SEK NOK AUD NZD CAD EUR USD JPY GBP CHF SEK NOK AUD NZD CAD Note: Table shows 1Y correlations between effective exchange rates on daily observations. Arrows indicate if relationship has risen or fallen compared to past 3 years June 2010

12 FX and Commodities Research Arne Lohmann Rasmussen Head of FX Research NOK, SEK John Hydeskov Senior Analyst G Kasper Kirkegaard Senior Analyst G Stefan Mellin Senior Analyst SEK mell@danskebank.se Sverre Holbek Senior Analyst Option strategies, CAD holb@danskebank.dk Christin Kyrme Tuxen Senior Analyst Commodities tux@danskebank.dk June 2010

13 Disclosure This report has been prepared by Danske Research, which is part of Danske Markets, a division of Danske Bank. Danske Bank is under supervision by the Danish Financial Supervisory Authority. Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high quality research based on research objectivity and independence. These procedures are documented in the Danske Bank Research Policy. Employees within the Danske Bank Re-search Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and to the Compliance Officer. Danske Bank Research departments are organised independently from and do not report to other Danske Bank business areas. Research analysts are remunerated in part based on the over-all profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or dept capital trans-actions. Danske Bank research reports are prepared in accordance with the Danish Society of Investment Professionals Ethical rules and the Recommendations of the Danish Securities Dealers Association. Financial models and/or methodology used in this report Calculations and presentations in this report are based on standard econometric tools and methodology. Documentation can be obtained from the above named authors upon request. Risk warning Major risks connected with recommendations or opinions in this report, including a sensitivity analysis of relevant assumptions, are stated throughout the text. First date of publication Please see the front page of this research report. Disclaimer This publication has been prepared by Danske Markets for information purposes only. It has been prepared independently, solely from publicly available information and does not take into account the views of Danske Bank s internal credit department. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst 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 no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may per-form services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. The Equity and Corporate Bonds analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for retail customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S. Danske Bank A/S is authorized by the Danish Financial Supervisory Authority and subject to limited regulation by the Financial Services Authority (UK). Details on the extent of our regulation by the Financial Services Authority are available from us on request. Copyright (C) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission June 2010