Investment Research General Market Conditions Tuesday, 28 August 2012 Danske Daily Key news US stocks closed unchanged Asian markets are slightly lower The Shanghai composite remains near a three-year low as China is yet to recover Mixed signals from FOMC members ahead of Bernanke s Friday speech Brent oil has fallen to USD112 per barrel Market movers today: EUR: M3 money supply EUR: Italy bond auction USD: Conference board consumer survey Markets Overnight Quiet trading yesterday as markets await Bernanke s speech on Friday and the UK markets were closed for summer bank holiday. Decent gains in Europe were followed by range-trading in the US. Asian bourses are slightly lower led by losses in Japan after the Japanese government downgraded its assessment of the economy for the first time in 10 months. The consensus GDP growth forecast for the current quarter, as reported on Bloomberg, is now 1% q/q AR down from 2.2% in early June. The Bank of Japan meets on 19 September and expectations are building for further easing measures. Two FOMC members spoke yesterday, Evans and Pianalto. Evans, the most outspoken dove, supports further easing such as QE3 and reiterated his call for the Fed to adopt a more formal rule on how to set monetary policy (e.g. keeping the policy rate at zero until unemployment falls below a certain threshold and as long as core inflation stays below a certain ceiling). More interesting, however, were Pianalto s comments as she is likely to be more of a median voter within the FOMC. She stressed that there are limits to what monetary policy can accomplish and said that while there are benefits to further easing the costs need to be evaluated; it is possible that future large-scale asset purchase programs will yield somewhat smaller interest-rate declines than past programs and it is possible that the Fed s presence in certain securities markets would become so large that it would distort market functioning. We still expect Bernanke to sound soft on Friday but whether he will be able to persuade the FOMC to ease further already at the September meeting remains to be seen. Market overview USD Oil Brent, USD 112,7 112,3-1 Gold, USD 1670,3 1660,5-0,58 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 07:30 1 day +/-,% S&P500 (close) 141-5 S&P500 fut (chng from close) 1405,4-1 Nikkei 901-3 Hang Seng 19766,1-0,16 17:00 07:30 +/-, bp US 2y gov 6 6 US 10y gov 5 4 - itraxx Europe (IG) 146 147 0,5 itraxx Xover (Non IG) 590 591 +/-, % EUR/USD 52 49-8 USD/JPY 78,670 78,510-0 EUR/CHF 0 0 0 EUR/GBP 0,793 0,791-1 EUR/SEK 8,249 8,222-0,33 EUR/NOK 7,30 7,27-0 Brent oil fell almost 3 dollars yesterday taking the front contract to around USD112 per barrel. The sharp move lower does question the strong uptrend that has lifted oil by more than 20 dollar since late June. The tropical storm Isaac looks less likely to cause any lasting damage to oil facilities in the Gulf but remains a source of volatility. Senior Analyst Kasper Kirkegaard +45 45128530 kaki@danskebank.com Important disclosures and certifications are contained from page 4 of this report.
Global Daily Focus today: This morning ECB will release July figures for monetary developments in the euro area, which will show whether lending took another hit in July. We expect M3 growth to stay on an increasing trend albeit still at moderate levels. In the US we expect the Conference Board s measure of consumer confidence to decline slightly to 65.4 following last month s large gain, as rising gasoline prices are currently weighing on consumer sentiment. It will be particularly interesting to see whether the sub-indices on the labour market improved further in August. Fixed income markets: The bullish momentum in US fixed income markets remained intact last night and Treasuries outperformed German Bunds, which traded mostly sideways with UK markets being closed and volumes being light. The move lower in US yields could have further to go and is consistent with a technical follow-through from last week s price action. A first test of resistance is just below 1.60% and if broken, we could see a test of the 1.50%-level. In Europe the bullish momentum in German Bunds seems less strong, perhaps due to a continuation of solid performance in the peripheral markets supported by ongoing comments that the ECB remains committed to its recently announced plans to support European government bond markets upon conditionality. Given the sentiment we expect Italian government auctions to do well in the coming days. Although bid-to-cover might be at the low end of the range, we expect Italy to sell the full amount of up to EUR9bn during the next days. FX markets: EUR/USD has corrected slightly lower to trade below 1.25 overnight but the euro stayed remarkably stable yesterday despite weak German Ifo numbers. We expect EUR/USD to range-trade from here until there is more clarity about policy responses in the US and Europe. Technical support is found around 1.2377 and resistance around 1.2570. The yen has gained alongside US treasuries over the past week and with the potential for a further decline in US yields we could see another test of 78 in USD/JPY. Excessive yen appreciation should trigger a Japanese policy response, though. Scandi Daily Sweden: July trade balance data are published. We expect a SEK 7.5bn surplus (in line with the consensus forecasts). Foreign trade data have outperformed both forecast and the year-ago numbers so far this year. Through June the accumulated surplus is SEK44.2bn versus SEK36.3bn in January-June last year. This might appear somewhat odd given the rather gloomy economic situation in many parts of the world. A closer look at the data reveals though that the improvement is the result of imports declining faster than exports. We suspect this can be partially explained by a sizeable reduction in manufacturing inventories in H1, a process that might be over by now. European money growth remains low 15.0 15.0 % y/y % y/y 12.5 12.5 Credit growth 10.0 10.0 7.5 7.5 5.0 5.0 2.5 2.5 M3 growth 0.0 0.0-2.5-2.5 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: Reuters EcoWin US S&P500 future 1425 1425 1415 1415 1405 1405 1395 1395 Fri Mon Wed Thu Fri Tue US 10y gov yield 1.88 1.88 1.78 1.78 1.68 1.68 1.58 1.58 Fri Mon Wed Thu Fri Tue Global FX EUR/USD (LHS) USD/JPY (RHS) 1.269 1.259 79.8 1.249 79.3 1.239 78.8 1.229 78.3 Fri Mon Wed Thu Sun Tue Key figures and events Tuesday,August28,2012 Period Danske Bank Consensus Previous 7:00 JPY Small business confidence Index Aug 46.6 8:00 DEM GfK Consumer Confidence Index Sep 5.9 5.9 9:00 ESP GDP, final q/q y/y 2nd quarter -0.4% -1.0% 9:30 SEK Trade balance SEK bn Jul 7.5 9.3 10:00 EUR M3 money supply y/y Jul 3.3% 3.3% 3.2% 11:15 EUR ECB announces allotment in 7-day (MRO) 13:00 EUR ECB announces allotment in 7-day termdeposits 16:00 USD Conference Board consumer confidence Index Aug 65.4 65.5 65.9 Source: Bloomberg and Danske Markets Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) 8.37 7.39 8.33 7.36 8.29 7.33 8.25 7.30 8.21 7.27 Fri Mon Wed Thu Sun Tue 2 Tuesday, 28 August 2012
Todays market data: 28 August 2012 STOCKS S&P500 Intraday, % Eurostoxx Intraday, % Close +/- 0,50 0,50 0,70 0,7 DJSTOXX50 2543 % Max 0,7 Max OMXC20 490 0,5% 0 Min - 0 0 Min - OMXS30 1066 0,7% 0,3 0,5 OSE BX 435 % -0,10-0,10-0,30-0,3 Close +/- -0-0 -0 - DOWJONES 13125-0,3% 15 16 17 18 19 20 21 09 10 11 12 13 14 15 16 17 18 Gr ey line indicates closing of Danish mar kets Grey line indicates opening of US markets NASDAQ 3073 0,1% 1month 1,8% 1month 3,5% S&P500 1410 % Year-to-date 12,2% Year-to-date 7,3% NIKKEI (07:30) 9010 % FX &COMMODITIES Oil, EUR/USD Intraday EUR 17:00 07:30 +/- Gold, $ Brent, $ 125,4 125,4 USD 125,22 124,87-0,35 07:30 1660,50 112,25 JPY 98,51 98,04-7 1day -3,60-1 125,1 Max ## 125,1 GBP 79,25 79,09-0,17 1month 37,60 5,78 Min ## NOK 738 727,19-2,89 Year-t-date 96,80 4,87 124,8 0,3 124,8 SEK 824,89 822,19-2,70 DKK 744,87 744,83-4 CRB CRB, Raw PLN 408,57 408,83 6 1M future Industrials 124,5 124,5 07 10 13 16 19 22 01 04 USD 17:00 07:30 +/- 07:30 305,89 518,49 JPY 78,67 78,51-0,16 1day -0,15 2 1month 2,27 GBP 158,00 157,89-0,11 1month 6,29 19,96 Year-to-date -4,74 CHF 95,91 96,19 8 Year-t-date 0,59 5 YIELDS &INTEREST RATES USD-Yields Intraday Spread, 8 USD2Y USD10Y Policy Rate 3M bp 17:00 07:30 +/-, bp 8 USD 5 2 17 USD 10Y 5 4-1 7Max 0,3 Max 1,7 EUR 0,75 9-46 USD 30Y 2,76 2,75 0 Min Min 6 GBP 0,50 9 19 JPY 10Y 1 1-1 6 0 0 DKK 0 0,32 12 5 4 SEK 1,50 1,96 46 07:30(-1)* 17:00 +/-, bp NOK 1,50 6 56 DEM 10Y 1,35 1,35 1 4 2 PLN 4,75 5,02 27 DKK 10Y 9 8 0 07 10 13 16 19 22 01 04 SEK 10Y 1 0-141 USD2Y (lhs) USD10Y (rhs) NOK 10Y 1,94 1,94 0 PLN 10Y 4,88 4,87-1 * As of closing previous trading day 5,0 4,0 3,0 10Y Yield Spread to Germany 4,36 3,52 9 0,71 0,59 0,19 6 USDJPYGBPFRF ITL DKKSEKNOKPLN - -0,55-6 5,0 4,0 3,0-1,8 US Yield Curve ## Max 00 ## Max 1,700 ## Min -3,250-2,3 ## Min ### -0,3 - -1,3-1,8-2,8-3,3 USD2Y USD5Y USD10Y D-t-D +/-, bp (right axis) 07:30 (left axis) 1 month ago (left axis) 1,8 German Yield Curve DEM2Y DEM5YR DEM10Y D-t-D +/-, bp (right axis) 07:30 (left axis) 1 month ago (left axis) Credit spread, itraxx s. 11* Credit spreads Swap Spread, bp** 250 1.000 17:00 07:30 +/- 07:30 1day 1month 900 USD 10Y 10 10 0 Europe (IG) 147 0-12 200 800 700 JPY 10Y 3 HiVol 228 1-23 150 600 Xover (N-IG) 591 2-36 500 100 400 07:30(-1)* 17:00 +/- 300 EUR 10Y 39 39 0 50 200 100 DKK 10Y 71 72 1 Finan. Sr. 254 4 0 0 0 SEK 10Y 87 84-2 Finan. Sub. 421 3 3 aug okt nov jan feb apr maj jul aug NOK 10Y Non-finan. 121 0-9 itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) * As of closing previous trading day * Ask price ** Ask price 3 Tuesday, 28 August 2012
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